Good morning and welcome to the Hilton Fourth Quarter 2021 Earnings Conference Call. All participants will be in a listen-only mode. After today's prepared remarks, there will be a question-and-answer session. Please note, this event is being recorded. I would now like to turn the conference over to Jill Slattery, Senior Vice President, Investor Relations and Corporate Development. You may begin.

Thank you, Chad. Welcome to Hilton's fourth quarter and full year 2021 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 forward-looking statements and forward-looking statements made today speak only to expectations as of today. We undertake no obligation to update or revise these statements. For a discussion of some of the factors that could cause actual results to differ, please see the Risk Factors section of our most recently filed Form 10-K. In addition, we will refer to certain non-GAAP financial measures on this call. You can find reconciliations of non-GAAP to GAAP financial measures discussed in today's call in our earnings press release and on our website at ir.hilton.com. This morning, Chris Nassetta, our President and Chief Executive Officer, will provide an overview of the current operating environment. Kevin Jacobs, our Chief Financial Officer and President, Global Development, will then review our fourth quarter and full year results. Following their remarks, we will be happy to take your questions. With that, I'm pleased to turn the call over to Chris.

Thank you, Jill. Good morning, everyone, and thanks for joining us today. As our results show, we made significant progress in our recovery throughout 2021. We saw a meaningful increase in demand for travel and tourism, and our team members around the world were there to welcome guests with our signature hospitality as they look to reconnect and create new memories. We continued to demonstrate our resiliency by remaining laser-focused on providing reliable and friendly service to our guests and by launching several new industry-leading offerings to provide them with even more choice and control. We also continued to expand our global footprint, adding even more exciting destinations to our portfolio and achieving a record year of room openings. All of this, together with our resilient business model, translated into solid results. For the full year, we grew RevPAR by 60% and adjusted EBITDA by 93%. Both RevPAR and adjusted EBITDA were approximately 30% below 2019 peak levels. More importantly, our margins were 500 basis points above 2019 peak levels, reaching roughly 66% for the full year. While some costs will come back in as we continue to recover, we remain extremely focused on cost discipline. Given our asset-light business model and the actions we took during the pandemic to further streamline our operations, we expect permanent margin improvement versus prior peak levels in the range of 400 to 600 basis points over the next few years. Turning to results for the quarter. RevPAR increased 104% year-over-year, and adjusted EBITDA was up 151%. RevPAR was roughly 87% of 2019 levels, with ADR nearly back to prior peaks. Compared to 2019, occupancy improved versus the third quarter with higher demand across all segments. Strong leisure over the holiday season drove U.S. RevPAR to more than 98% of 2019 levels for December. Business travel also improved sequentially versus the third quarter, with solid demand in October and November before the Omicron variant weighed on recovery in December. For the quarter, business transient room nights were approximately 80% of 2019 levels. Group RevPAR improved 11 percentage points over the third quarter to roughly 70% of 2019 levels. Performance was largely driven by strong social business, while recovery in company meetings and larger groups continued to lag. As we kicked off the new year, seasonally softer leisure demand, coupled with incremental COVID impacts due to the Omicron variant, tempered the positive momentum we saw through much of the fourth quarter. For January, system-wide RevPAR was approximately 75% of 2019 levels. Despite some near-term choppiness, we remain optimistic about accelerated recovery across all segments throughout 2022. We anticipate strong leisure trends to continue again this year, driven by pent-up demand and nearly $2.5 trillion of excess consumer savings. Our revenue position for Presidents' weekend is seven percentage points ahead of 2019 levels. And our position for weekends generally is up significantly for the year, both indicating continued strength in leisure travel. Similarly, we expect growth in GDP and nonresidential fixed investment, coupled with more flexible travel policies across large corporate customers to fuel increasing business transient trends. As a positive indication of business transient recovery, at the beginning of January, midweek U.S. transient bookings for all future periods were down 13% from 2019 levels and improved to just down 4% by the end of the month. Additionally, STR projects U.S. business transient demand will return to 92% of pre-pandemic levels in 2022. On the group side, our position for the year is to remain steady as Omicron-related disruption was largely contained to the first quarter of 2022, with most events rescheduled for later in the year. We continue to expect meaningful acceleration in group business in the back half of the year as underlying group demand remains strong. Compared to 2019, our tentative booking revenue was up more than 25%. Additionally, meeting planners are increasingly more optimistic, with forward bookings trending up week over week since early January. Overall, we remain very confident in the broader recovery and our ability to keep driving value on top of that. This should allow us to generate strong free cash flow growth, and our expectation is to reinstate our quarterly dividend and begin buying back stock in the second quarter. Turning to development. We opened more than a hotel a day in 2021, totaling 414 properties and a record 67,000 rooms. Conversions represented roughly 20% of openings. We achieved net unit growth of 5.6% for the year, above the high end of our guidance, and added approximately 55,000 net rooms globally, exceeding all major branded competitors. Our outperformance reflects the power of our commercial engines, the strength of our brands, and our disciplined and diversified growth strategy. Fourth quarter openings totaled more than 16,000 rooms, driven largely by the Americas and Asia Pacific regions. In the quarter, we celebrated the opening of our 400th hotel in China and our first Home2 Suites in the country. This positive momentum continued into the new year with the highly anticipated opening of the Conrad Shanghai just last month, marking the brand's debut in one of the world's busiest and most exciting markets. During the quarter, we also continued the expansion of our luxury and resort portfolios, with the opening of the Conrad Tulum and the new all-inclusive Hilton Cancun. With more than 400 luxury and resort hotels around the world and hundreds more in the pipeline, we remain focused on growing in these very important categories. We were also thrilled to welcome guests to the Motto New York City Chelsea, a major milestone for this quickly growing brand and a perfect addition to Hilton's expanding lifestyle category. This hotel exemplifies what it means to be a lifestyle property. It incorporates unique and modern design elements and provides guests with authentic and locally minded experiences. We also celebrated the first lifestyle property in Chicago with the opening of the Canopy Chicago Central Loop and debuted the brand in the U.K. with the opening of the Canopy London City. These spectacular properties joined recently opened Canopy hotels in Paris, Madrid, and São Paulo. In 2021, we grew our Canopy portfolio by more than one-third year-over-year, opening hotels across all major regions. We ended the year with 408,000 rooms in our development pipeline, up 3% year-over-year, even after a record year of openings. Our pipeline represents an industry-leading 38% of our existing supply, giving us confidence in our ability to deliver mid-single-digit net unit growth for the next couple of years and eventually return to our prior 6% to 7% growth range. For this year, we expect net unit growth to be approximately 5%. As our guests' travel needs continue to evolve, we again introduced innovative ways to enhance the guest experience. In the quarter, we announced the launch of Digital Key Share, which allows more than one guest to have access to their room's digital key via the Hilton Honors app. To further reward our most loyal Hilton Honors members, we introduced automated complimentary room upgrades, notifying eligible members of upgrades 72 hours prior to arrival. With our guests at the heart of everything we do, we've been thrilled to hear that the early feedback for both industry-leading features has been overwhelmingly positive. In the quarter, Hilton Honors membership grew 13% year-over-year to more than 128 million members. Honors members accounted for 61% of occupancy in the quarter, just a few points below 2019 levels, and engagement continued to increase across members of all tiers. We work hard to ensure that our hospitality continues to have a positive impact on the communities we serve. For that reason, we're incredibly proud to be recognized for our global leadership in sustainability. For the fifth consecutive year, we were included on both the World and North America Dow Jones Sustainability Indices, the most prestigious ranking for corporate sustainability performance. Overall, I'm extremely pleased with the progress we've made over the last year, and I'm very confident that Hilton is better positioned than ever to lead the industry as we enter a new era of travel. With that, I'll turn the call over to Kevin to give you more details on the quarter.

Thanks, Chris, and good morning, everyone. During the quarter, system-wide RevPAR grew 104.2% versus the prior year on a comparable and currency-neutral basis. System-wide RevPAR was down 13.5% compared to 2019, as the recovery continued to accelerate across all segments and regions, driven by border reopenings and strong holiday travel demand. Performance was driven by both occupancy and rate growth. Adjusted EBITDA was $512 million for the fourth quarter, up 151% year-over-year. Results reflect the continued recovery in travel demand. Management and franchise fees grew 91%, driven by strong RevPAR improvement and license fees. Additionally, results were helped by continued cost control at both the corporate and property levels. Our ownership portfolio posted a loss for the quarter due to the challenging operating environment and fixed rent payments at some of our leased properties. Continued cost discipline mitigated segment losses. For the quarter, diluted earnings per share adjusted for special items was $0.72. Turning to our regional performance. Fourth quarter comparable U.S. RevPAR grew 110% year-over-year and was down 11% versus 2019. The U.S. benefited from strong leisure demand over the holidays, with transient RevPAR 1% above 2019 levels and transient rate nearly 5% higher than 2019 for the quarter. Group business also continued to strengthen throughout the quarter, with December room nights just 12% off of 2019 levels. In the Americas outside of the U.S., fourth quarter RevPAR increased 150% year-over-year and was down 17% versus 2019. Continued easing restrictions and holiday leisure demand drove improving trends throughout the quarter. Canada continued to see steady improvement as borders remained open to vaccinated international travelers. In Europe, RevPAR grew 306% year-over-year and was down 25% versus 2019. Travel demand recovered steadily through November but stalled in December as a rise in COVID cases led to reimposed restrictions across the region. In the Middle East and Africa region, RevPAR increased 124% year-over-year and was up 7% versus 2019. Performance benefited from strong domestic leisure demand and the continued recovery of international inbound travel as restrictions eased. In the Asia Pacific region, fourth quarter RevPAR fell 1% year-over-year and was down 34% versus 2019. RevPAR in China was down 24% compared to 2019 as travel restrictions and lockdowns remained in place. However, occupancy in the country held steady versus the third quarter as summer leisure travel was replaced with local corporate and meetings business. The rest of the Asia Pacific region benefited from relaxed COVID restrictions and the introduction of vaccinated travel lanes in several key markets. Turning to development. As Chris mentioned, for the full year, we grew net units by 5.6%. Our pipeline grew sequentially and year-over-year, totaling 408,000 rooms at the end of the quarter, with 61% of pipeline rooms located outside the U.S. and roughly half under construction. Demand for Hilton-branded properties remains robust, and along with our high-quality pipeline, we are positioned to emerge from the pandemic stronger than ever. Turning to the balance sheet. We ended the year with $8.9 billion of long-term debt and $1.5 billion in total cash and cash equivalents. We're proud of the financial flexibility we demonstrated through the pandemic and remain confident in our ability to continue to be an engine of opportunity and growth as we look to reinstate our capital return program. Further details on our fourth quarter and full year results can be found in the earnings release we issued 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 all of you this morning, so we ask that you limit yourself to one question. Chad, can we have our first question, please?

The first question will be from Shaun Kelley with Bank of America. Please go ahead.

Hi, good morning, everyone.

Morning, John.

Good morning, Chris. I found your comments on margins quite interesting. Generally, we consider hotels as beneficiaries of recovery rather than reflecting on the pandemic and the potential cost opportunities it may have created. Could you provide more insight into the key changes in your overall operating model that are contributing to that improvement? Additionally, could you help us understand how this might progress over the next couple of years as you work towards your 500 basis point margin target?

I'm glad to address that. We highlighted it because it's crucial, though it hasn't received much attention. Our management team and Board of Directors are intensely focused on it. The goal during a crisis is to seize opportunities, and as we approached it, we identified actions not only to manage the crisis but also to strengthen our business. We didn’t face significant liquidity concerns, as our balance sheet is strong. In March and April of 2020, our focus was on recovery—determining how to emerge successfully and improve our growth rate, operational quality, and profit margins. We've been continuously dedicated to this effort. If you look at the details, there are three main ways we've achieved this. First, we've grown. We've added units that, despite being less productive during COVID, will start contributing to earnings in the coming years at a rate of over 5% annually. Second, our non-room revenue streams, such as our license agreements and high-margin businesses like HGV and our Amex co-brand, have thrived. In 2021, we exceeded pre-pandemic fee levels and expect significant growth in that area to continue. Lastly, we have restructured our cost management. Like others affected by COVID, we sought cost reductions in both hotels and corporate functions, but we aimed to reengineer our operations for long-term efficiency rather than simply cutting costs. This effort helped us reduce expenses that we believe we can maintain moving forward. Combining these factors, we estimate a real margin improvement of 400 to 600 basis points. Despite last year’s challenges, we managed to deliver margins that were impressive given that our RevPAR and EBITDA were 30% below peak levels. It's important to recognize that achieving this won't be without its challenges; we may not have fully allocated spending in some areas last year due to hiring difficulties. However, as we move into 2023 and 2024, we believe we’ll meet or exceed our margin goals. This is not coincidental; our focus has been deliberate, and shareholders can trust that we will continue prioritizing this. Historically, we've generated substantial free cash flow, and higher margins enhance that flow, enabling us to return more capital over time. As I mentioned in my opening comments, we plan to begin returning capital in the second quarter, which is just six weeks away.

Thank you very much.

Thank you. And the next question will come from Joe Greff with JPMorgan. Please go ahead.

Good morning, everybody.

Good morning, Joe.

I have a two-part question on development. One, it's hard not to notice that the managed footprint has caught up at least relative to the growth rate into 2019. How do you see the footprint growth between managed and franchised growing in 2022? I know you talked about 5% this year, longer term 6% to 7%. And then can you also just talk about what's going on development-wise in China currently?

Sure, Joe. I'll address that. I'm not completely sure which numbers you're referencing, but our division between managed and franchised has remained quite stable as the pipeline develops. Currently, 75% of our existing supply is franchised, primarily in the U.S. and the Americas. However, our pipeline indicates that 40% of our franchising is occurring outside the U.S., with nearly half in the APAC region as our franchisee business expands there. Over time, while we have seen an increase in managed deals outside the U.S., we are now increasingly shifting towards franchising in those areas. If I misunderstood your question, I'm open to follow-up. On the topic of China, development trends have been influenced by the pandemic. There seems to be a direct link between global openings and signing activity in various regions, with the U.S. leading. Europe saw a slow start this year but picked up momentum towards year-end as lockdowns eased. Interestingly, China has differed; despite lockdowns affecting mobility, we have not seen a slowdown in activity. Our approvals in 2021 rose by 45%, and openings increased by 30%. We expect to see similar growth in openings through 2022. Our strength in China is supported by our Plateno-Hampton joint venture, the launch of Home2 with Country Garden, and a new individual franchising program for Hilton Garden Inn. We're also seeing significant full-service and luxury signings. Overall, despite COVID challenges, China has shown robust activity.

Great, you answered it. Thanks, Kevin.

And the next question will come from Thomas Allen with Morgan Stanley. Please go ahead.

Thank you. I want to follow up on Shaun's question and seek some clarification. Looking at the 2024 consensus for your company, the market expects $3.1 billion in EBITDA with a 70% margin. Chris, you mentioned earlier that we anticipate gaining 400 to 600 basis points of margin compared to 2019, which would put you in the 65% to 66% range. What do you believe the market may be miscalculating?

I have no earthly idea. As you know, we haven't been giving guidance for any period of time, let alone for 2024. So Thomas, I think the best thing to do is let my comments stand as they were. We're confident that on a run rate basis, it will sort of be in that range. We're very proud of that, of being able to accomplish that. Obviously, we're always looking to under-promise and over-deliver; so that will never change, but not much to add at this point.

All right, Chris, I was considering two things based on your comments. First, there will be a shift in the mix as the lower-margin-owned business returns. Second, your margins have historically increased each year. Therefore, my main point is that your comments about margins suggest a confidence in raising them rather than indicating that your expense base will expand significantly, keeping you at the same margin level. Is that the correct way to interpret it?

I'm not entirely clear, but I believe we do have confidence that the structural changes we've implemented will lead to increased margins on a like-for-like basis. If you consider that margins would have continued to grow organically under the previous structure, we share that view, and we also believe there's an additional benefit from the structural changes we've made that we expect to sustain.

Yes. I would just like to add quickly regarding real estate. While you mentioned the mix of business, it's important to note that real estate has been decreasing gradually. Even with varying rates of recovery from COVID and different mixes, over time, real estate will represent a smaller segment of the business as we focus on expanding our managed and franchised operations and continue to mitigate risks.

Yes. While reiterating the point about real estate, I want to emphasize that it is inherently a lower-margin business. This has been factored into our guidance and expectations for the next few years. Additionally, from an EBITDA growth perspective, it will provide significant benefits due to its prior underperformance. Given its current structure, real estate is expected to contribute positively and experience substantial growth in the coming years.

Thanks for the clarification.

And the next question will come from Smedes Rose with Citigroup. Please go ahead.

Hi, thanks. I wanted to ask a little bit more about your thoughts on China. And maybe you could just give us a reminder of what kind of contribution China made to fees in '19 and maybe kind of how far that fell off in '21, just because it seems like there's an opportunity for some significant rebounding. Maybe it sounds like it's running behind kind of the rest of the world. And if you have any kind of thoughts on maybe how China addresses its policy around COVID going forward or if they keep the kind of zero tolerance in place indefinitely.

Yes. From what I remember, China contributed about five percentage points to our overall EBITDA in 2019, and I would estimate that amount is currently less than half, likely around 2%. You’re correct; there has been a significant slowdown, and this is true for our entire international operations. Our businesses in the Asia Pacific and Europe have also taken longer to recover. Looking at our EBITDA numbers from 2020 and 2021, they were disproportionately U.S.-focused; in 2020, approximately 73% of our business was in the U.S., and that grew to around 94% or 95% last year but dropped to about 83%. We are seeing a recovery, and eventually, we expect to reach a more normalized state globally. Beyond just China, there is substantial growth potential in the entire international market as we move towards normalization. Regarding the global regions, the Middle East, while a smaller part of our business, is leading the recovery and has already surpassed its 2019 levels as shown in our fourth quarter results. We anticipate that trend to continue. The U.S. is next in line for recovery, and I believe we will see a transition in the second quarter followed by rapid recovery in the latter half of the year. Europe will likely follow suit, although the situation is more complex due to the varying restrictions across countries. We can see a general trend of Europe reopening. Asia Pacific is expected to lag behind, primarily due to China and its policies. In my opinion, as the rest of the world opens up and we reach an endemic stage of COVID, there will be increasing pressure on China to follow suit. While I expect China to lag, I believe that Europe will recover quickly, and Asia will follow thereafter. As we enter the second half of the year, I think the global environment will look quite different, with more openness compared to the past two years. The first half may show slower progress, but by the second half, I anticipate a much more open global market overall.

Great, Chris. Thank you.

The next question is from Stephen Grambling with Goldman Sachs. Please go ahead.

Hi, thanks. I'd like to come at margins from maybe the perspective of your owners which is always key to driving that overall flywheel. How are you thinking owner margins will progress versus pre-pandemic? And could you tie in how you envision the hotel experience will structurally change, whether it's longer stays, charging or opt-in for cleaning or reducing non-consumer-facing labor? And where do you see the greatest opportunity for investing back into your owners to improve the experience amidst some of these shifting preferences?

Yes. That's a great question, and there's quite a bit to discuss, so I'll address it step by step. If we reflect on the start of the pandemic, we've effectively led the way, focusing on our owners from the beginning, whether it involved advocating for government assistance or being flexible with our standards as the business faced challenges. During the recovery phase, similar to what Chris mentioned about seizing opportunities for improvement, we've also focused on driving advancements at the property level. This includes innovative approaches to reengineering our food and beverage services, particularly breakfast offerings, and optimizing housekeeping. Additionally, we've made numerous small adjustments to improve profitability for our properties during COVID, ensuring that these efficiencies continue moving forward. We recognize the need for service recovery since hiring labor has been challenging, and we must reinstate some service standards. It's well-known that inflation and wage inflation are affecting us, but on the flip side, inflation can boost our revenue. We adjust room prices nightly, so if inflation is a burden on costs, it can also benefit our revenue. The revenue base is greater than the expense base, which should result in higher margins as we move forward. Overall, we believe we can enhance the customer experience by offering what they want, eliminating what they don't need or will not pay for, and leveraging revenue growth in an inflationary context to help our owners achieve higher margins.

Okay, thank you.

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

Hi, good morning, everyone.

Good morning.

Good morning. When I try to think about some things that have perhaps permanently changed or at least changed from 2019, I'm wondering what your thoughts are on the degree of key money that you're giving today for new hotels under your brand, number one. And how have the franchise contracts changed? Are they more flexible today versus pre-COVID, less flexible? I'd just like to hear your thoughts on those.

Sure, I'll start with the second part. There’s really no difference in our franchise agreements now compared to pre-COVID. This is a longstanding business with established protocols and public franchise documents that haven’t changed over time. Regarding key money, this year we've seen it increase compared to the past. I attribute this more to the competitive environment rather than a direct COVID-related issue. We're leading in growth, and our competitors are trying to catch up, which adds to the competition. However, the percentage of deals associated with key money remains about 10%, consistent with pre-COVID levels. We've been fortunate to sign some high-profile deals recently, such as the Waldorf Astoria Monarch Beach in California and Resorts World in Las Vegas, as well as deals in Cancun and Tulum. These deals have been in the works for a long time and are strategic, carrying a slightly higher key money than usual. This trend may continue for a while, and we have some strategic initiatives that could keep this number elevated throughout 2022 and possibly beyond. In conclusion, relative to our peers, we have performed well in terms of capital deployment to achieve our growth, which has been exemplary.

Thank you. And the next question will come from Rich Hightower with Evercore. Please go ahead.

Hi, good morning, everybody.

Good morning.

So I want to go back to a portion of the prepared comments. And Chris, I think you mentioned it was STR's forecast. I know this is not a Hilton forecast, but for business transient demand, I think you get to the low 90s as a percentage of pre-COVID levels this year. So again, not your forecast, but I am wondering if you could take me through the building blocks in your mind as to perhaps how we might get to that level by the end of this year, especially in the context of hybrid workforces, work from home and so forth.

Yes, it's included in our forecast, and I actually believe it could be even better. I see a strong possibility that we will reach or exceed our 2019 levels by the end of this year. The reason I think this is because there is significant pent-up demand, which has been amplified by the Omicron variant that caused many people to delay their travel plans. While I can't speak for the whole industry, I can speak for our own experiences. We are consistently engaging with customers of all sizes, from large corporations to small and medium enterprises. During the crisis, we noticed that large corporate customers significantly reduced their travel—by about 70% to 80% during the third and fourth quarters. However, small and medium enterprises were traveling more than ever. Historically, 80% of our transient business came from SMEs, with only a small percentage from large corporations. While we value our corporate clients, our business model has never relied solely on them. At the onset of the pandemic, we re-evaluated our strategy. We quickly realized that while large corporate travels had halted, SMEs were still actively traveling, albeit not as much as they do now. This necessity for SMEs to travel due to their business requirements allowed us to shift our efforts and focus on them. We adapted our sales force and maintained our entire team during this challenging time, unlike many competitors. We recognized the need to adjust how we directed our resources. As a result, we believe we've already replaced about half of the corporate business that we lost. I have confidence that the corporate sector will return. Whether or not it all comes back, we are positioned to enhance our demand base by focusing even more on SMEs, while gradually welcoming back corporate clients. This combined approach may provide us with a significant pricing advantage compared to before. Additionally, it's worth noting that SMEs generally pay higher rates than large corporates, leading to a better pricing structure for us. Given our strong access to SMEs and their robust demand, combined with the gradual return of corporates, I am optimistic. Conversations with travel managers across the country confirm that corporations are beginning to return. When we consider all these factors, it's reasonable to expect a much improved environment, especially in the second half of the year.

All right, helpful. Thank you.

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

Thanks very much for taking my questions. I just want to ask a question about the kind of construction environment. I noticed your percentage of pipeline that's under construction has dropped below 50% for the first time in quite a while. Is that just phasing? And does that feed into this year's guide on unit growth? Or does that mean we maybe can't expect a recovery in 2023 to return to the normal 6% to 7% takes a little bit longer?

Yes, Richard, that's a slight decrease, almost negligible in terms of our construction levels. It was rounded to half before, and it rounds to half now. According to industry data, there is actually a larger decline. We're effectively managing to keep things under construction. We believe we'll initiate more rooms this year compared to last year. In the U.S., our largest market, we expect a slight decline for one more year, with 2022 likely being the lowest point. This contributes to our forward-looking forecast, primarily influenced by rising input costs. Currently, construction costs are increasing year-over-year in the mid-teens, and inflation in raw material and labor costs is a global issue, particularly in the U.S. This all factors into our outlook. We have not publicly stated when we expect to return to our previous growth level of 6% to 7%, but we anticipate it may take two or three years to reach that point. We believe 2021 was the lowest point for starts globally, and we expect recovery to begin in 2022 in the U.S. You must start projects to deliver them, so we need to initiate more construction to return to previous levels of net unit growth. This is influencing our outlook for both this year and beyond. Lastly, despite the ongoing challenges from the pandemic, we are still achieving over 5% net unit growth and expect to maintain that rate through the development delays caused by the pandemic, and then we anticipate a recovery. This demonstrates the resilience of our business and our capacity for growth.

Very helpful. Thanks so much.

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

Good morning, everyone. Thanks for taking my question. I appreciate all of the detail so far. I wanted to ask about the aspect of the fees which is non-RevPAR-driven, like your royalties and credit card fees, etcetera. Is there any sort of insights or help that you can offer us as we think about modeling out the next year or two as to what those might grow and any puts and takes?

Yes, David, I think we've talked about this in the past. We get that it's a little bit hard to model sort of specifically what's going on. Our non-RevPAR-driven fees cover a bunch of different things, obviously, our co-brand credit card and our license fees from HGV being the largest part of that, but we have other things in there like residential development fees and the like. And we've said this before, that's been less volatile, right? So it declined less than RevPAR declined during COVID. And now at this point, it's growing less than RevPAR. I think for 2021, it grew about two-thirds of the rate of RevPAR, and that's probably a decent way to think about it going forward. It's hard to say, right? It depends on how those things perform and what goes on. But I think it's going to continue to be a decent growth rate and additive to our fees. For 2021, it was actually higher; our non-RevPAR fees or I think Chris, you might have said this earlier, so sorry if I'm repeating it, but our non-RevPAR fees were higher than they were in 2019. And our credit card program is performing quite nicely. I think just a few stats to give you some color. Our account acquisitions were up 45% last year. Our spend was up about one-third year-over-year. And so really strong performance but again, at a lower rate than overall RevPAR because RevPAR is growing at a really high rate in recovery. So hopefully...

So growth but at a lesser rate?

At the moment.

Perfect. Thank you.

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

Thank you. I initially wanted to clarify the comments about transient midweek nights being down only 4% for future periods, as that seemed like a surprisingly strong recovery. However, you've already mentioned the growth in small and medium segments. Do you have anything further to add regarding the 4% decline? Considering the shorter booking window, it seems challenging to maintain such a positive figure. So I’m curious...

No, I don't. I don't, Robin. I don't have anything to add other than, yes, it's short. The very nature of advanced bookings and transient only gives you a window so far out in time. It's a relatively short window. But those are the stats. And I gave them to you because I think it is indicative not only of the strength that's building in that environment but the change from literally the beginning of the year when Omicron was a very big thing to a world where Omicron is becoming a lot less of a thing, and we're getting to more endemic stages of COVID-19.

Could you provide more details on the plan to reinstate the dividend and return to share repurchase in Q2? Specifically, will the initial dividend payout be set lower than pre-pandemic levels? I'd like to hear your thoughts on how you're balancing these decisions as you resume returning value to shareholders.

Yes. As I have mentioned several times, we plan to reinstate the dividend in Q2. We have not officially declared a dividend yet, so a final decision has not been made. However, our intention at this point is to restore the dividend to the previous level of $0.15 per share. We aim to return to that level and use most of our free cash flow to reintroduce our share repurchase program. I understand there are various opinions on this matter, but I believe that maintaining a modest dividend is beneficial as it attracts a broader range of investors, which we demonstrated before COVID. After discussions with many shareholders, I still hold that view. To ensure the best long-term returns for all shareholders, we believe that a substantial part of our strategy should focus on share buybacks. We have conducted extensive evaluations to determine if there have been any changes in the market or our shareholder base that would suggest a different approach, and we have not found any. Therefore, we will proceed as planned. While we have not provided specific guidance, we aim to start with at least the free cash flow we expect to generate this year. Although we have not yet fully recovered to 2019 levels, our business is performing better now, and due to the structural improvements we have made to enhance margins, we believe our free cash flow will be in line with 2019 numbers. So, we'll begin with that as our baseline and move forward from there.

Okay, great. Thanks very much.

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

Hi, good morning. Thanks for taking my question. I believe your conversion NUG component of total growth has been in the 20% range. Can you help update us on this in terms of where it was for 2021? And then for 2022 against your NUG guide, how should we think about converts and what that will be as a percentage being slightly offset by higher, I guess, ground-up growth?

Yes, I appreciate it, Chad. The straightforward answer is that it will likely remain consistent. It has been around 20%. We are actually completing more conversions, as indicated by our statistics. Our approvals and openings for the year increased by 13% year-over-year. In fact, last year our approvals for the full year saw a 42% rise in conversions. We are experiencing solid growth in conversions while also pursuing more ground-up development. Therefore, the base in that equation is also increasing. Will it be slightly higher in the next couple of years? It could be, depending on how a few significant deals play out, which might affect that percentage a bit. However, I would consider it to generally hover around 20% or the low 20s in deliveries. I think this is indeed a positive development overall. In the Americas for 2021, we signed nearly half of the conversion deals completed in the region. We are engaged in numerous conversions. The reason we are not seeing a spike from 20% to 30% is that we are also delivering a considerable amount of new development.

Thank you very much.

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

Thanks very much, everybody, for joining today. Obviously, continuing on with recovery. I think we are, as I've said a couple of times, hopefully, getting through the Omicron variant and very rapidly to an endemic stage of this. We're obviously optimistic as we look to the second quarter and the second half of the year and overall, beyond that. And so thanks for the time. We'll look forward to updating you on trends that, I think, will be a lot better the next time we talk. So, thanks and have a great day.

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