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DATE

  • Wednesday, July 23, 2025, at 9 a.m. EDT

CALL PARTICIPANTS

  • President & Chief Executive Officer — Christopher J. Nassetta
  • Chief Financial Officer — Kevin Jacobs

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RISKS

  • System-wide RevPAR decreased 0.5% year over year on a comparable and currency-neutral basis, with management citing "softer trends in the US and China."
  • U.S. comparable RevPAR decreased 1.5% primarily due to "pressure across business transient and group" segments.
  • RevPAR in China declined 3.4%, driven by "continued weakness in corporate travel demand" and "changes in government travel policies."

TAKEAWAYS

  • Adjusted EBITDA: Adjusted EBITDA was $1.08 billion, up 10% year over year, driven primarily by timing of non-RevPAR items.
  • Diluted EPS (adjusted for special items): $2.20.
  • System-wide RevPAR: Down 0.5% year over year.
  • Adjusted EBITDA Guidance: $935 million to $955 million for the third quarter;
  • Adjusted EBITDA Guidance: $3.65 billion to $3.71 billion for the full year.
  • RevPAR Guidance: Expected to be flat to modestly down for Q3; Expecting 0%-2% RevPAR growth for the full year.
  • Net Unit Growth: 7.5% for the second quarter. Guidance of 6%-7% net unit growth for the full year.
  • New Hotel Openings: 221 hotels totaling more than 26,000 rooms, representing a 52% year-over-year increase (excluding acquisitions and partnerships).
  • Development Pipeline: Over 510,000 rooms in Hilton's development pipeline, with nearly half under construction.
  • Conversions: Conversions accounted for 33% of deals, expected to reach 40% for the full year; conversions spanned 10 brands.
  • Spark Brand: More than 170 hotels are open, with 200 in the pipeline.
  • Hilton Honors Members: Exceeded 226 million Hilton Honors members.
  • Asia Pacific RevPAR: Up 0.3% year over year;
  • APAC ex-China RevPAR: Up 5.2% year over year. China RevPAR declined 3.4%.
  • Middle East & Africa RevPAR: Rose 10.3% year over year, with strong results during major holidays and events.
  • Group Position for 2026 and 2027: Up in the "high single digits" according to management.
  • Management and Franchise Fees: Increased 8% year over year.
  • Capital Returns: $1.7 billion returned to shareholders year to date; on track for approximately $3.3 billion for the year.
  • Board-Authorized Dividend: $0.15 per share for the third quarter.
  • Signings: 36,000 rooms signed, with management expecting "high single-digit growth in signings" for the full year.
  • Planned New Brand Launches: At least two more conversion brands to be launched by year-end.

SUMMARY

Hilton Worldwide (HLT -2.55%) management stated that non-RevPAR fee timing drove outperformance in adjusted EBITDA, which exceeded the high end of the guidance range. Geographic performance varied, with significant relative RevPAR strength in the Middle East, Africa, and certain Asia Pacific markets, while China and the US posted year-over-year RevPAR declines. Guidance reflects cautious near-term outlooks for RevPAR, but management maintains confidence in net unit growth and the expanding development pipeline, including accelerated conversion activity and upcoming new brand launches.

  • Chris Nassetta said, "We feel very confident in our ability to drive net unit growth solidly within our 6% to 7% range for the full year."
  • Chris Nassetta confirmed, "We signed our first Canopy hotels in Tokyo and Italy," highlighting international expansion efforts.
  • Management emphasized that capital returns guidance does not include the impact of future share repurchases.
  • International portfolio expansion included milestone entries in France, Austria, Northern Ireland, Turkiye, Hawaii, Saudi Arabia, India, and Africa.
  • The company highlighted a "game-changing" extended stay brand, Live Start Studios, launched to address evolving long-stay demand and owner needs.
  • In response to investor inquiries, Chris Nassetta clarified that "6% to 7% net unit growth" forecast is based on organic growth for the full year and is not dependent on acquisitions or partnerships.

INDUSTRY GLOSSARY

  • RevPAR: Revenue per available room, a key lodging industry metric calculated as total room revenue divided by the number of available rooms and time period.
  • Conversion: The process of converting an existing hotel, often unbranded or with another flag, into one of Hilton’s branded properties.
  • Net Unit Growth: The net increase in the total number of hotels in the Hilton system over a period, accounting for openings minus removals.
  • Pipeline: The total number of hotels and rooms that are approved and contracted to open in the future, including those under construction.
  • Hilton Honors: Hilton's customer loyalty program, offering rewards to frequent guests.
  • Key Money: Capital provided by a hotel franchisor or management company to incentivize an owner to join or convert to the brand.

Full Conference Call Transcript

Chris Nassetta: Thank you, Jill. Good morning, everyone, and thanks for joining us today. Our second-quarter results continued to reinforce the power of our business model and the benefits of strong net unit growth, which drove great bottom-line performance. Adjusted EBITDA for the quarter exceeded $1 billion, meaningfully beating expectations even with modestly negative system-wide RevPAR. Adjusted EPS also exceeded our expectations. Our strong portfolio of brands, powerful commercial engines, and disciplined execution continued to drive meaningful free cash flow. Year to date, we've returned $1.7 billion to shareholders in the form of buybacks and dividends and remain on track to return approximately $3.3 billion for the full year.

Turning to results, the quarter turned out to be a bit noisier than expected, driving system-wide RevPAR down 50 basis points year over year. Performance was driven by continued strength in the Middle East Africa region and Asia Pacific ex-China, but offset by softer trends in the US and China. Adjusting for holidays and calendar shifts, system-wide RevPAR would have been modestly positive. In the quarter, leisure transient RevPAR grew 1% as an elongated spring break window and easy year-over-year comparison supported leisure demand growth. Business transient RevPAR decreased 2% driven by the elongated holiday schedule, government spending declines, weaker international inbound business, and broader economic uncertainty.

While it's early in the third quarter, we have seen a pickup in non-government business demand. Group RevPAR was roughly flat with favorable trends in company meetings largely offset by soft convention business and social events. We did see positive momentum in lead volumes from corporates with month-over-month sequential growth throughout the quarter, and 2026 and 2027 group position are up in the high single digits. As we look ahead to the third quarter, we expect RevPAR to be flat to modestly down again with holidays and calendar shifts continuing to weigh on reported results. On an adjusted basis, we would expect modest RevPAR growth.

For the full year, we continue to expect RevPAR growth of flat to up 2% with improving trends in the fourth quarter driven by modest increase in demand and easier year-over-year comparisons. As we think about our business over the intermediate term, I am very optimistic. In our largest market, a more favorable regulatory environment, certainty, tax reform, expected settling down on global trade policy, continuation of very healthy corporate profits, and significant investments across a multitude of industries, including AI, AI-related and core infrastructure investment should accelerate economic growth and unlock meaningful increases in travel demand. This matched with very limited industry supply growth should drive stronger RevPAR growth over the next several years.

Turning to development, during the quarter, we opened 221 hotels totaling more than 26,000 rooms, representing a 52% year-over-year increase excluding acquisitions and partnerships, and achieved net unit growth of 7.5%. Our luxury and lifestyle portfolios continued their extraordinary expansion around the world. During the quarter, we celebrated the opening of our thousandth property in the luxury and lifestyle categories. We also announced our plans to welcome three new luxury and lifestyle hotels per week in 2025. None are more impressive and iconic than the Waldorf Astoria in New York, which reopened its doors just last week, marking the beginning of a new era for the spectacular hotel that has been a cornerstone of New York City culture since 1931.

The greatest of them all, as Conrad Hilton famously described, the landmark property recaptures the hotel's original grandeur once again setting the benchmark for luxury hospitality globally. During the quarter, our conversion-friendly brands continue to gain track with guests and owners, which helped fuel our growth in key international markets. LXR debuted in France with the opening of the Saxe Paris, a landmark eighteenth-century building transformed into a refined gathering place in the heart of Paris. We welcomed our first Tapestry Hotels in Northern Ireland and Turkiye, and Hawaii, while Curio debuted in Vienna, Austria. We also opened our first all-inclusive Curio resort in The Dominican Republic.

Doubletree continued to be an important driver of conversions, reaching 700 hotels worldwide and entering its sixtieth country during the second quarter. Spark opened more than 40 hotels in the quarter, bringing its portfolio to more than 170 hotels across six countries, with roughly 200 more hotels in the pipeline. Overall, conversions span 10 brands and accounted for over a third of our openings in the quarter. We remain confident in our ability to continue driving strong conversions, thanks to the power of our existing brands, which have consistently delivered an industry-leading share of conversions in the U.S., and with the upcoming launches of exciting new conversion brands.

In July, we also debuted the first hotel of our game-changing new extended stay brand, Live Start Studios. Grounded in extensive research and a deep understanding of the evolving needs of long-stay and hotel owners alike, LiveSmart Studio represents the latest chapter in our growth strategy and reinforces our commitment to offering a Hilton experience for every traveler and every stay occasion. In addition to strong openings, we signed 36,000 rooms in the quarter, putting us on pace to deliver high single-digit growth in signings for the full year. We also increased our development pipeline to more than 510,000 rooms, growing both year over year and sequentially versus the first quarter with expansion in strategic markets and across chain scales.

We announced plans for Waldorf Astoria to debut in key destinations, including Helsinki, Bali, and New Delhi, in the coming years, and we signed Nomad Hotels in Singapore and Detroit, which marked the brand's respective debuts in the Asia Pacific and Americas region. We signed our first Canopy hotels in Tokyo and Italy, our first Tempo in Canada, and in July, we signed our first Tapestry in Saudi Arabia. We also further expanded our focused service pipeline to meet the growing demand for affordable upscale accommodations. During the quarter, we announced that Hampton will soon debut in Thailand, True will enter Vietnam, and Spark will open its first hotels in Saudi Arabia and Puerto Rico.

We also committed to key growth milestones in emerging economies, including expanding our portfolio in India tenfold and tripling our portfolio in Africa in the coming years. We continued growth in construction starts with continued growth in construction starts, tremendous international opportunities, and a strong conversion story. We feel very confident in our ability to drive net unit growth solidly within our 6% to 7% range for the full year. As you all know, we have an incredible skill set of identifying white space in developing and launching new brands.

I mentioned last quarter, the team is working hard behind the scenes on several new brands in the lifestyle space, in addition to a couple of new concepts in the alternative accommodation space, a number of which are conversion-friendly. We have done the research with our customers and have already received tremendous feedback from our owners on these new brands, a couple of which will be launched by year-end.

Hilton Honors continues to perform extraordinarily well with more than 226 million members, up 16% year over year, with membership now evenly split between US and international travelers, reflecting the strength of Hilton's global reach and a further testament to our success in delivering premium products and experiences for any stay occasion anywhere in the world our guests want to travel. Everything we do is underpinned by our award-winning culture, and our incredible family of Hilton team members continue to differentiate our brands from the competition. In July, Brand Finance named Hilton as the most valuable hotel brand for the tenth consecutive year.

Additionally, just last week, our Hampton, Home2 Suites, and True brands were named best in category by J.D. Power for their respective segments in the US. During the quarter, we were also named the number one best workplace in Switzerland, Austria, The Netherlands, India, and Vietnam, adding to the 660 Great Place to Work Awards and more than 70 number one wins around the world since 2016. Overall, we feel good about where we are and are very optimistic about the business. We have the best brands in the industry with more coming.

The biggest development pipeline in our history, and the economy in our largest market is set up for better growth, all of which should continue to drive strong performance. Now, going to turn the call over to Kevin to talk a little bit more detail about the quarter and our expectations for the full year.

Kevin Jacobs: Thanks, Chris, and good morning, everyone. During the quarter, system-wide RevPAR decreased 50 basis points versus the prior year on a comparable and currency-neutral basis, driven by declines in occupancy and modest rate growth. Adjusted EBITDA was $1.08 billion in the second quarter, up 10% year over year and meaningfully exceeding the high end of our guidance range. Outperformance was predominantly driven by timing of non-RevPAR items. Management franchise fees grew 8% year over year. For the quarter, diluted earnings per share for special items was $2.20. Turning to our regional performance, second quarter comparable US RevPAR decreased 1.5%, largely driven by pressure across business transient and group.

As declines in government spend and softer international inbound demand weighed on performance. For full year 2025, we expect US RevPAR growth to be at the lower end of our system-wide RevPAR range. In The Americas outside the US, second-quarter RevPAR increased 3.8% year over year, driven by strength in the luxury and lifestyle portfolio, particularly in resort locations. For full year 2025, we expect RevPAR growth to be in the mid-single digits. In Europe, RevPAR grew 2% year over year, driven by growth in Continental Europe supported by strong group business. For full year 2025, we expect low single-digit RevPAR growth given continued weakness in the UK and Ireland.

In the Middle East and Africa region, RevPAR increased 10.3% year over year, driven by record-breaking months of travel around key events and holidays, including Eid, Hajj, and Catholic and Orthodox Easter. For full year 2025, we expect RevPAR growth in the mid-single-digit range. In the Asia Pacific region, second-quarter RevPAR was up 0.3% year over year. RevPAR in APAC ex-China increased 5.2%, led by strong group trends in Japan and Korea. RevPAR in China declined 3.4% in the quarter, largely driven by continued weakness in corporate travel demand, particularly in Tier two and Tier three cities, and changes in government travel policies.

For full year 2025, we expect RevPAR growth in Asia Pacific to be roughly flat, assuming modest RevPAR declines in China. Turning to development, as Chris mentioned, for the quarter, we grew net unit 7.5% and have more than 510,000 rooms in our pipeline, of which nearly half are under construction. Looking to the year ahead, we expect to deliver 6% to 7% net unit growth for the full year. Moving to our guidance for the third quarter, we expect system-wide RevPAR growth to be flat to modestly down. Expect adjusted EBITDA of between $935 million and $955 million and diluted EPS adjusted for special items to be between $1.98 and $2.04.

For the full year, expect RevPAR growth of 0% to 2%, adjusted EBITDA of between $3.65 billion and $3.71 billion, and diluted EPS adjusted for special items of between $7.83 and $8. 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 second quarter for a total of $73 million in dividends for the year. Our Board also authorized a quarterly dividend of $0.15 per share in the third quarter. 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 second quarter results can be found in the earnings release we issued earlier this morning. This completes our prepared remarks. We would now like to open the line for any questions you may have. We would like to speak with as many of you as possible, so we ask that you limit yourself to one question.

Chris Nassetta: Michael, can we have our first question, please?

Operator: Absolutely. The first question comes from Shaun Kelley with Bank of America. Please go ahead.

Shaun Kelley: Good morning, everyone. Thanks for taking my question. Chris, you mentioned in your prepared remarks a little bit about some green shoots you're seeing. I think that's consistent with what we've heard from some of the airline and other travel providers. But hoping you could elaborate a little bit on what you're seeing across maybe the three different segments, leisure, business, and group? And then specifically, what's it going to take organically to get a little bit better in the 4Q? There is some concern in the fourth quarter about tougher comps just lapping some of the pent-up demand after the election last year. Thank you.

Chris Nassetta: Yeah. Good question. And, you know, I tried to cover some of it, Shaun, in prepared comments. So I'll try and do the first part of this briefly because it's redundant. Think if you sort of break it down the segments, by quarter, what you saw in the second quarter as I covered was relative strength in leisure, which we, you know, you would expect it was a little bit more than we thought simply because sort of the rolling nature of what went on between spring break and then the impact at the end of the quarter of July 4 and the shift of July 4.

If you put those two things together, you know, it's sort of not surprising that you would have seen strength in leisure and weakness on the other segments of the business, which is what we saw. It was probably a touch different than we expected. Mean, obviously, we said that relatively flat, which means it could be a little up, a little down. It was a little down. So it was pretty much in line with what we thought, with maybe a little bit more impact from the rolling holiday shift. And, know but generally in line.

As you get into the third quarter, you have a similar sort of situation given Jewish holiday shifts and the like that are, I think, in a from a segment point of view, distort things again a little bit where you're gonna probably see third quarter leisure be strongest and business and business transient and group? Being relatively weaker, which is not obviously up until the second quarter what we've been seeing. I think when you get when you get to the fourth quarter, that will reverse itself because you're going to get finally to a quarter that is a little bit more normalized.

It will the fourth, you know, the fourth quarter has a bit of a benefit from the Jewish holiday shift into the third quarter, but I think it's a little bit more normal quarter. And I think as a result, what you're gonna see is pretty decent we think, leisure growth, but comparable business transient growth. And then group sort of leading the way, which is what more recently we have been seeing. That our view on the fourth quarter which we spent a lot of time on and I mentioned in my prepared comments, is based on sort of a few green shoots that we're seeing, which I'll talk about.

You know, particularly in the group space, as you look at the corporate group, you're starting to see uptick. As you look out in the '26 and '27, you see really strong position. What you've seen in group this year post Liberation Day, was just like a lot of the segments, everybody got rattled and everything kind of froze up. As I said on the last call, it's a little bit of a wait and see attitude. Will that affect all segments It even affect leisure, affected leisure, but in second quarter, was distorted by spring break and fourth of July.

As you get into fourth quarter, we're starting to see the early signs that is unfreezing, that people are getting out of the wait-and-see. Certainly, as you look at 'twenty six and 'twenty seven, you're seeing it. The other thing that's going on in the fourth quarter is the comps are just easier. If you think about last year, we had a lot going on. We had major strikes in many of our major markets, around the country. That know, that had a pretty significant impact. And we had a press US presidential election, nobody will forget that. And that's not good for, you know, maybe good for Washington.

On occasion, but it's really broadly not good because people are traveling a bit less around that. Again, we're in a you know, there's a lot of moving parts broadly, and so like last time, we're doing our as you know, a lot of people pulled guidance we didn't. We to do our best. I think we were pretty darn close. We said plus or minus flat, and I think we ended up there. I think we're, you know, we have decent sight lines into Q3 feel good about that. And For Q4, again, I gave you the underpinning of why we feel better. We feel pretty good about it. I mean, there's a lot of moving parts.

Think you know, the green shoots, you know, I talk about them, are what we're seeing in booking behavior on the group side, what we're seeing very recently on the corporate business transient side, is saying that the wait and see that the that it's fine. The freeze of April, May, to a degree, June we're starting to see a thaw.

But it's really early, which is why my comments, and I know this is quite a filibuster I have going here and so there'll be no more questions probably, but you know, I wanted to lift up because there's so much noise in the system right now politically and otherwise, and I'm not obviously going to get political but if you really lift up and look at what's going on, I said in our largest market, The US, which is 75% of our business, you may hate or like what's going on, but it is, I think, pretty hard to deny that over the next several years, we're not going to end up in a condition where we're going to have incremental economic growth.

And a lot of that is going to be coming in the form in my opinion, of in the area that has the highest correlation to growth in room night for hospitality, which is NRFI, non residential fixed investment. You have a regulatory environment that is and going to continue to be much easier, tax environment where you have certainty corporate profits that remain quite strong and resilient, huge amounts of investments still to come in the core infrastructure that got done in the last administration, very little of which has still been spent, that is going to continue to be a gift that keeps giving.

On top of that, investment that's going on in terms of AI and related areas, data centers, energy around it, and the reshoring not of everything that our population consumes, but some of the critical elements. Again, the chips spill, that's just getting rolling and there are other critical elements from a national defense point of view where we are gonna reassure some of these things, and all of those things require over the next two, three, four, probably, you know, next five plus years but I think it's hard to look five years.

Over the next two or three years, huge amounts of activity and investment, what we have found again, a very high squared for on a slight lag on non-residential fixed investment. My belief is you're going to start, whether it's in the fourth quarter, I don't know. I gave you the reasons why we feel better about the fourth quarter, we've been pretty good at forecasting. So, I'd say feel pretty good about that. But as I think about 'twenty six, 'twenty seven, '28, I think lifting up above all this crazy noise I am an optimist, self declared, but I think they're legitimate reasons to feel really, really good about demand.

Then at the same time, while we outperform from a from the standpoint of our growth and our development story, which I'm sure we'll get to, I won't get into that. I might my current filibuster. I'll wait Supply growth in the industry is at the lowest levels that we've really ever seen because all the noise in the system coming out of COVID meant there wasn't a lot of money available. And now all the noise in the system around what's been going on you know, in the in the last six or twelve months between an election and tariff issues and tax uncertainty, these things are getting nailed down, but there's a lag effect.

You're going to be in a super cycle, continued super cycle of very, very low over the next several years increases in new supply. So again, we can talk about cores, I know you have to. I know our investors many of them care, some care more than others. But my job, I think, is to like lift up above the noise and try and give you a sense of sort of the real what I see the real the title shift I think the title shifts are hard to see when you have this much noise, but I think if you lift up the title shifts feel awfully good to me.

Operator: Thank you very much. And your next question comes from Stephen Grambling with Morgan Stanley. Please go ahead.

Stephen Grambling: Hey, thank you. Speaking of title shifts, you did mention that you're still expecting modest declines in China for RevPAR. Maybe pivoting to the development side, in that market, what development trends are you seeing there? And if we continue to see weakness in that market or other factors maybe impacting development, where do you see the biggest opportunities to backfill any pockets of weakness that could come up in that market, maybe looking around the world?

Chris Nassetta: Yeah. That's a great question. We do expect modest declines. I mean, when we started the year, we had as you know, I think we talked about it on prior call or two, we expected to have a little bit of growth in China same store I think we went to flat last time. I think with what's going on China at the moment, which is, you know, an austerity campaign to sort of make sure that they can get the real estate sector righted to they can put themselves in a good position for whatever trade deals they need to make.

At the moment, that is rippling through in a way that it's not dramatically impacting the business, but on the margin, we expect to be a little bit down. Having said that, I would say, listen, I wouldn't like right now, and I've said this on many calls, and not that I'm in the middle of it, but I think you know, we are sort of as two countries a degree inexorably linked to one another, I think our treasury secretary said this morning on Bloomberg, or I thought I saw it somewhere, the idea isn't to decouple. It's just to have a, you know, a different kind of agreement with one another.

You can sort of see that we already have some of the trade deal done, I think you can see a path to a rational outcome you know, with China from a from a US trying to China trade point of view, which I think then, you know, makes their dealings with the rest of the world much, much easier. So, you know, part of what's going on there, again, is austerity related to being braced for whatever might come as those things sort of hopefully work themselves out. I think I think China's same store business will pick up steam, China's big population we've talked about it a thousand times, they love to travel. You know, they wanna travel.

It's just right now, they're sort of like clamping down on consumption in a bunch of different ways. I suspect that is a relatively short lived experience. On the development side, we still see terrific activity. Again, you have to terrific Again, lifting way up China will have ups and downs. By the way, The US economy has ups and downs recessions, like they're a big complicated economy. They're going to have you know, they're gonna they're gonna have the same thing.

Underneath it is that the capacity you know, meaning the number of hotel rooms per, you know, per capita in China is, like, crazy lower than you know, other large economies, including our economy, like a fraction of it. So they are undersupplied in what we do. In other forms of real estate, you know, of the resi, some of the commercial, retail, they may be oversupplied certainly in certain markets, but in our business, they are broadly undersupplied. You have people, large population, wanna travel eventually, travel. They will also travel outside the United States, which or outside of China, which is a big deal.

You have a you know, very, you know, much more limited supply of hotels in that market. And importantly, you have a real estate market, which has been part of their problem that needs to be reformatted, and we are becoming a really important part of the solution of taking, as we've talked about on prior calls, some of these ghost cities and buildings and turning them into active productive uses. And so the net the net impact of all that is in the development world, and Kevin can add whatever he sees he wants to add. We are going to see all our metrics up year over year. We're gonna sign more deals. We're gonna start more under construction.

This year in China than we did last year. So you know, we are, you know, continuing to be you know, seek quite favorable conditions. And, eventually, I do believe the same store will come back and support it, And what we're hearing from owners in that market is the economics support it. And why would that be in a slower economy? Because it's undersupplied.

Stephen Grambling: Great. Thank you.

Operator: And your next question comes from Dan Politzer with JPMorgan. Please go ahead.

Dan Politzer: Hey, good morning everyone. Thanks for taking my question. I just wanted to follow-up on net unit growth It sounds like, Chris, you're kind of reinforcing that 6% to 7%, which is I think you're term used was solidly in that range. This has been an area we've kind of I did very intentionally. Yeah. It seems emphatic. So I wanted to kinda go back to that. I guess what's driving the reinforced confidence there Has there been a pivot in the conversations that you've had in the development community Or is this more of a reflection of some of those brands coming online or just elevated conversion If you can kind of parse that out.

Chris Nassetta: Yeah, I think it's a little bit of everything. Obviously, we're continuing to have really good success on conversions with a bunch of great conversion brands. We're gonna add a at least a couple more conversion brands probably by the end of the year. That we think are going to add to that. The brands continue to perform really, really well, so the feedback from the owner community is strong. Things being disrupted around the world is good is maybe bad for new construction, but it's actually quite good for conversion activity. So we feel good about that.

And I would say the increase we've been confident, I've been saying we be in the 6% to 7% range, and I'm a little bit more emphatic because of that part of the story, but it's also starts. I mean, starts are gonna be up 16, 17% this year. And once they start, almost 99%, 100% of the time, they finish. And so, we've seen those numbers even in a very challenging environment. Tick up. So that, you know, that makes us feel really good. I mean, we have the biggest pipeline in our history, half of it's under construction, We continue to see more and more going under construction.

The brands are performing well and we model it out, we feel like we're solidly in that zone and feel good about it. It. Thanks so much.

Operator: And your next question comes from David Katz with Jefferies. Please go ahead.

David Katz: Good morning, everybody. Thanks for taking my questions. Look. I wanted to really get at is there's some building momentum on the luxury side of things. And if you could just give us some general commentary about what that implies about the economic intensity and of the long term potential, you know, volatility in RevPAR that brings your system. I'd love just some perspective on that. Thank you.

Chris Nassetta: Not sure I fully understand the question, but I'll answer what I think it is, David, and you can I can rephrase if you'd like? No. You can course correct me. Listen, we're we are super focused in luxury and lifestyle. Luxury is a relatively small smaller component. You know, lifestyle, we have a whole bunch of existing brands, we have a whole bunch of new brands. And the reason we're doing it, luxury you know, while I've said many times, we're never gonna that's not where the bulk of the profitability of the company is ever gonna come from.

It becomes an important part of the whole halo effect of our, you know, our broader network effect and Hilton honors and loyalty and giving people the choices they want when they want those. And we feel super good about what we have going on in luxury. The SLH deal is working really, really well in terms of what the metrics that the owners are, you know, the benefit the owners at SLH are getting and the benefit that our Hilton Honors members are getting that we anticipated. Our core luxury brands particularly Waldorf, talked about New York. By the way, if you haven't been in New York, go and go and see it. It's spectacular.

I'm sure everybody that's in New York will eventually get through it. You'll be some event there, but we're making tremendous progress, you know, and, you know, with all our luxury brands, but particularly Waldorf, have 36 open, 30 in the pipeline. We're gonna open six Waldorf's this year. You know, in some of the most you know, well, New York, I would say, the most important luxury hotel, not just for us, but probably for anybody in the world. So, you know, we're making really good progress. Our customers like it. You know, and we'll continue to grind, and those are complicated.

And as I said, they're part of the they help prime the pump of loyalty and other things. But I think they are never going to be a disproportionate you know, piece of the puzzle in terms of bottom line profitability, but they're important and that's why we focus on it. Lifestyle, is a little bit different. I mean, lifestyle can span a collection brand that's upscale, you know, a micro urban brand like Motto, all the way up to Nomad and Luxury Lifestyle and everything in between. In the end, when you add it all up, lifestyle is a mega category, It can be thousands of hotels.

You know, that we have found like everybody else that there are customers, particularly younger customers, that love our core products and they stay in them, but they really want these you know, sometimes for some of their needs. You know, in certain for certain trip occasions. And so We've obviously been super focused on it. As I mentioned, we're gonna have two or three more brands you know, that I mentioned on the last call, of in the upscale plus areas of lifestyle that we think, you know, have real scalability opportunities And, you know, what we're trying to do, not to you know, again, I like to lift up, is just build the most powerful network effect.

I said when we went public, and I say it to our teams all the time, more that we can serve any customer for any need they have anywhere in the world they want to be, the more powerful the system is, the higher we can drive market share, you know, the more loyalty members we get, the lower our dish distribution costs become, and so it goes. And so lifestyle we did 1,000 with luxury and lifestyle. I think that the addressable market is into the many of thousands, not necessarily the luxury piece of it for the reasons I described, but with the broad range of lifestyle and at different price points.

And so we're super focused on it super excited about it, and I think making terrific progress.

David Katz: Thank you.

Operator: And your next question comes from Steve Pizzella Deutsche Bank. Please go ahead.

Steve Pizzella: Good morning, and thank you for taking our Steve. Good morning. Just wanted to try and expand on convergence a little more if we can. Can you talk about what you're seeing in the current environment both domestically and internationally? How much key money is being used in addition what do you view as the addressable market for conversion including some of the more bulkier 500 to a thousand plus unit deals?

Chris Nassetta: Yes. Think it's a good question, Steve. I'll just give you some of the just some of the conversion stats. 33% of our deals in the quarter were conversions, that's up 50%. We expect it's going to be 40% for the year. That addressable market, there's look, if you think about if you think about parts of the world like Europe in particular where there a lot more unbranded hotels, than there are branded hotels and then you think about we take I think at the end of the day, have to come back to we take share I mean, Chris implied this in his early answer, but how do you have confidence in 67%?

How do you confidence that you can fill in conversions when the new construction environment is a little bit slower. Well, part of it is that you fish where the fish are, right? Developers want to do deals. And when new construction gets a little bit harder, by the way, our new construction is fine and our brands are more financeable than our competitors' brands. And so we take share in new construction. So that's a good story. I don't want to I don't wanna discount that.

But then you talk about brands that are you know, perform less well, particularly in a softer demand environment where people are seeking better performance and better RevPAR index driven by our network effect, the addressable market mean, we could do the math is huge, right? Because you have all the independent hotels and then you have all the hotels you have an existing brand where either the contract's coming due or, you know, or the contract's coming due and it can perform better. Right? And so we have a lot of confidence in our conversion strategy.

Bigger hotels, you're starting to see you'll see a couple between now and the end of the year that we can't talk about yet, where there are larger hotels right, you know, 100, 800 room hotels that are independent and sort of in this environment don't wanna go it alone. So we're we're coming in and converting to our brand. So it's sort of all the above, and we really believe that the strength of our brands gives us a leg up in conversions. And then key money I'd say not really that much. It really hasn't changed all that much. It is a slightly more competitive environment. We have been very disciplined. Right?

We still have of our rooms under construction, we only use key money on 8% of the deals. And so that's sort of consistent with long term trends even in an environment where our competitors are using a little bit more to try to claw back some of the share that we're taking from them. And so it's not in the higher end, when you get into luxury and convert conversions of larger hotels, it does get competitive because you just have more brands chasing it. But I think overall, our ranges of use in terms of dollars and percentage of deals is gonna remain very

Operator: Your next question comes from Robin Farley with UBS. Please go ahead.

Robin Farley: Great. I'm trying to figure out which of my two questions to use for my one. I guess I'll go with Kevin, your comments I'm gonna I'm gonna try and stick to it. Kevin, you had mentioned the timing of non RevPAR fees. I wonder if you could just give a little bit of color around I don't know if that sounds like something was pulled forward that you thought maybe would have come in the second half of the year, that kind of thing, just kind of to quantify that a little?

And also, I assume that your guidance probably had included the idea that you would have had a couple of resorts that were owned by Playa that you would get termination fees from? Was that in your guide and did that was that in Q2 or will that more fall in Q3? So just some color around that fee piece. Thanks.

Kevin Jacobs: Yes. That's all fair. I'll take the second half first because it's second part first because it's easier. Yes, we there were some termination fees that some of which has been highly publicized because it was part of a public transaction. That was timing from third quarter. We expected in third quarter came in the second quarter, was all built into our guidance. The reason we said predominantly timing is it almost all built into our guidance, right?

Had a little bit of movement here and there on FX and a couple of other things on RevPAR, but largely it timing of you get termination fees, some of the other ancillary lines of business that are non RevPAR driven and a little bit of corporate expense that we view as almost entirely timing and that's why you saw us keep our guidance consistent for the year.

Robin Farley: Okay, great. Thanks. And any I don't know if you can break out like the dollar amount that sort of shifted maybe into Q2 from Q3 and then I'll hop back in line for my other No, was going to keep it to what I said, Robin, is, you know, largely timing. Yeah.

Robin Farley: Totally fair. Thank you.

Operator: And your next question comes from Brandt Montour with Barclays. Please go ahead.

Brandt Montour: Good morning. Thanks for taking my question. So, I just wanted to drill in on Spark The prepared commentary is pretty clear, right? You have 170 open, 200 in the pipeline. I think there's a concern floating around out there that the first sort of wave of spark are lower hanging fruit And then the next wave would sort of take a little bit longer to get done. And perhaps contribute less to net unit growth over sort of maybe the same period of time. Is there any sort of is there any truth to that? And if so, maybe you just help us understand which conversion brands are going to would make up for that.

Chris Nassetta: Yes. Well, the second part first. There's all our other conversion brands are performing well. And as I mentioned, we're gonna have a couple more by the end of the year that we think will add meaningfully to growth. But doesn't take anything away from Spark. I don't know what the noise out there is Probably most you know, likely coming from our competitors. You know, and I'll leave it at that. But Spark's doing great. You know, we, as I said, we have a 170 open, 200 in the pipeline, Our my goal is by the end of next year to have 400 of those plus open. I think we will. Why 400?

Because I think we can generally prove sort of semi-scientifically that when you get a system size, if it's distributed, you know, the right way, particularly here, it's it's largely starting out in the U.S., it starts to take on a life of its own. Know, the key to being able to get there and keep the momentum is obviously performance. Always and market share. Spark is now the highest. If you look at our comparable hotels, which now is gone from a very small set of hotels to a growing and decent-sized set, it's the highest market share brand that we have. So it is performing exceptionally well.

I've also heard noise out from others in the market at Spark's not all it's cracked up to be performance-wise. It's that's a bunch of hooey. It's literally the highest market share brand, and we some very high market share brands. So I feel very good about that. And as I mentioned, in the prepared comments, it's a big world out there, right? So you know, we've got India, that, you know, we've done a deal. We've got we mentioned Saudi Arabia. We mentioned, you know, Puerto Rico, Europe is just getting cranked up, you know, there, Latin America, we are just getting cranked up.

No, I'm not I'm I believe we are on course to deliver a spectacular continue to deliver a spectacular brand that will continue adding to our growth through conversions by driving extraordinary performance for those owners that sign up with us. Again, I'll go back to reinforce. That doesn't mean it's the only engine of growth. I think we have a bunch of others that continue to add you know, significantly.

Doubletree is obviously a huge contributor as well as Tapestry Curio, and we are, as I mentioned last time, in the putting the finishing touches on another collection brand and lifestyle that is sort of in the tapestry zone, but is for more unique assets, and we think the addressable market there is very, very large, and we already honestly are out you know, talking to owners and putting deals together, and we'll talk more about it when we have when we have a name and a little bit more substance. But that gives you a sense of how excited ownership community is that we don't even have a name. We have the concept And they're willing to sign up.

So it's a multifaceted approach. It's not in any way overdependent on Spark, but Spark's doing great. And we'll will continue to be a great contributor for many years to come.

Operator: Excellent. Thanks, Chris. And your next question comes from Lizzie Dove with Goldman Sachs. Please go ahead.

Lizzie Dove: Good morning. Thanks for taking the question. Good, I guess, also last year, you did couple partnerships like with SLH and some inorganic things with Nomad and Graduate. I'm curious what your appetite is today and on the go forward into doing of these and whether that kind of 6% to 7% unit growth that you're kind of talking about, if that's organic or if it includes any kind of other partnerships or small deals that you might do?

Chris Nassetta: No. I think the way you should think about that is it's organic. And that like we're very happy with all three of those, SLH, now I view as organic, although the bulk of that came into the system last year. There'll be a little bit that comes in this year. With Nomad and Graduate, we're super excited about how those are going. We even have some things to continue to offshoots in the graduate world and all the accommodations and other approaches to being able to monetize in our core business that acquisition. And so we're super excited about you know, the how those are going and the returns that we'll get on them.

But you listen, Ford, I've been here eighteen years, and other than those you know, two things really with SLH being a partnership, Nomad and Graduate. We've not acquired anything, you know, So it's not to say, know, that I say this and I'm I'm required to never say never we could, but that's not what our focus is. Our focus, which is why I put it in my comments, is on getting back to brand building the way we do it, where we see legitimate white spaces that are opportunities to continue to build our network effect and add to our growth. So the entire organizational focus is there.

We're not out sort of bounty hunting to do acquisition So the way you should think about the 6% to 7% is that does not imply we're gonna go out buy anything. That implies our existing and new brands are gonna deliver that kind of growth.

Lizzie Dove: Super clear. Thank you.

Operator: And your next question comes from Michael Bellisario with Baird. Please go ahead.

Michael Bellisario: Just want to go back to fundamentals in your positive momentum comment. I mean, are you seeing group leads actually convert to more signed contracts? Or is there still a gap there? And then similarly on BT, are you seeing any momentum recently in terms of a pickup in demand or bookings? Thanks.

Chris Nassetta: I sort of said it's a really good question, Michael. And I tried to address it in various comments I've made I'll say it again. Yes, we are, but very early days. I mean, you know, we're coming out of this very noisy period, and I think there's sort of a recovery. You know, we're in a recovery zone where things have definitely stabilized. You can, you know, go look at what all the airlines said, and you can sort of get that same thing.

Things have sort of stabilized, and if you look at very recent data trends, I think you could start to say what I what I said earlier that the great you're going from the great wait and see to the great thaw happening, but it's early. You know? It's it's it is really early, which, again, not to be a Pollyanna. That's why I said, like, it's happening. I mean, these things are happening you know. You know, I think it's undeniable sort of the bigger picture, the title movements that are going on.

You know, exactly, you know, what month you know, you start to see you know, it light up or the afterburner, so to speak, to go on. It's really it's that's very hard to judge. But I but we are seeing the thaw occur. You know? It's it's, you know, clearly been stable, and now you're starting to see pockets and segments where people are booking. That's why I gave the booking data for groups in '26 and '27 because people have the confidence to say, all right, I don't know what's going on right now, but I got to I got to plan in advance.

And they are booking to a point where, you know, we have high-single-digit group position in the '26 and '27. I think that's a super strong leading indicator of the psychology out there. But we're early in the we're early in this reporting season. We're early in the third quarter, and we still have all this noise in the third quarter. Think it takes to the fourth quarter to get past some of the calendar shifts and holiday shifts.

Operator: And your next question comes from Smedes Rose with Citi. Please go ahead.

Smedes Rose: Hi, thanks. I just wanted to ask you, if you provide any kind of updated thoughts on your presence in the all-inclusive space. You noted a handful of properties were transitioned out due to the M and A. Is that still a big kind of focal area for your leisure guests? Are you kind of more focused on getting kind of near-term conversion opportunities there? Just kind of do you think about, I guess, maybe backfilling some of those rooms?

Chris Nassetta: Yeah. We feel listen. I we've been focused in the AI space. As everybody else. I think it's a, you know, a good growth business. Don't it's is obviously only applicable in limited markets, so it is not the biggest growth opportunity that we see in the world, but it is an important one, which is why we focus on it. You know, the playa thing obviously worked out in a way that everybody knows. Which, you know, set up you know, reduce the size by rooms of the portfolio that we opened some other things. So we're not really particularly far off. We're five or 6,000 rooms that we have open.

You know, if you look at the pipeline and other things that we have under discussion, a similar level of active discussions. We have found, again, for certain markets, it's it's it's a good outlet for redemptions for, you know, for some of our most loyal honors members. So we will much like we've done in luxury and other areas, we will continue to move forward and continue to grow there. We feel great about our performance and great about the growth opportunities. We just opened in The Dominican Republic, you know, last week, beautiful, big, new Curia, and we have a bunch of other a bunch of others of those coming. So again, I you know, it's important.

It's not relative to the, you know, a big global business, it's a you know, it's a relatively small part of our business, and I think when we wake up in five or ten years, it will be a lot bigger than it is today but it's not going to be a super large percentage of the overall business. Yeah. And I think Smedes will do both new builds and conversions. I mean, Chris referenced the Curio in The Dominican. That's that's a new build, but we also converted Hilton on the beach and the Hotel Zone in Cancun. There was a big conversion.

And so we'll do both, and I think as Chris said, that space is important to us and important to our network effect. But you're also getting some pretty good concentration out there that space, which should yield some conversion opportunities over time.

Smedes Rose: Great. Thank you.

Chris Nassetta: Sure.

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

Chris Nassetta: Thanks, everybody. As always, we appreciate you spending an hour of your life with us to talk about it. As you can see, in the dialogue today, obviously coming out of Liberation Day and other things, there's been a decent amount of noise in the system. But I'm I and we are very optimistic. I mean, even in the middle of all that noise, we were able to give guidance sort of plus or minus, you know, meet it or beat it. Even with declining REV modestly declining REVPAR is able to sort of deliver great bottom line results. I think it's a testament to the strength and resiliency of our model.

On the development side, we're hitting on all cylinders. We've are feeling incrementally better on the development, not worse. About delivering what, you know, what we've said we're gonna deliver in the to 7% range, the biggest pipeline, great brand performance, more brands coming. And I do believe that we have a reasonably very good setup coming from a fundamentals point of view in our large market here in the U.S. over the next two or three years. Notwithstanding a lot of noise, we feel very good about where we are We will look forward to catching up with you after our third quarter. And give you a little bit more insight as to what we see at that time.

Thanks again, and enjoy the rest of the summer.

Operator: Thank you for attending today's presentation. This now concludes our 2025 second-quarter investor conference call. You may now disconnect.