Good morning. And welcome to the Hilton Fourth Quarter 2023 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 Chapman, Senior Vice President, Investor Relations and Corporate Development. You may begin.

Thank you, M. J. Welcome to Hilton's fourth quarter and full year 2023 earnings call. Before we begin, we would like to remind you that our discussion this morning will include forward-looking statements. Actual results could differ materially from those indicated in the forward-looking statements. And forward-looking statements made today speak only to our expectations as of today. We undertake no obligation to update or revise these statements. For a discussion of some of the factors that could cause actual results to differ, please see the Risk Factors section of our most recently filed Form 10-K. In addition, we will refer to certain non-GAAP financial measures on this call. You can find reconciliations of non-GAAP to GAAP financial measures discussed in today's call in our earnings press release and on our website at ir.hilton.com. This morning, Chris Nassetta, our President and Chief Executive Officer, will provide an overview of the current operating environment and the company's outlook. Kevin Jacobs, our Chief Financial Officer and President of Global Development, will then review our fourth quarter and full year results and discuss our expectations for the year. 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. We are happy to report a great end to what was another really strong year for Hilton. For the year, system-wide RevPAR grew 12.6% versus 2022 with solid growth across every major region and chain scale compared to 2019, RevPAR increased 10.7%. Strong top line performance drove record adjusted EBITDA of nearly $3.1 billion, up roughly 20% year-over-year to the highest level in our company's history. During the year, we launched two new brands, introduced new innovations, expanded our partnerships, and opened a near record number of rooms, all of which further strengthened our network and enabled us to welcome more guests than ever before. Our strong top and bottom line performance drove significant free cash flow, enabling us to return $2.5 billion to shareholders. Turning to results for the quarter. System-wide RevPAR increased 5.7% year-over-year, exceeding our expectations, driven by strong international and group trends. Group RevPAR rose 6% year-over-year due to an uptick in small company meetings and convention demand. Business transient recovery continued in the quarter with RevPAR up more than 4% driven by gains in both rate and occupancy. As expected, leisure transient RevPAR increased 3%, decelerating modestly versus the third quarter, largely due to seasonality. Compared to 2019, system-wide RevPAR grew 13.5% in the quarter, up more than 200 basis points sequentially compared to the third quarter. Demand continued to improve, with December's system-wide occupancy reaching 2019 peak levels. Group RevPAR outperformed expectations, increasing 8% versus 2019 and up more than 700 basis points sequentially versus the third quarter. Business transient continued to recover growing 5% versus 2019. As expected, leisure RevPAR remained strong growing 25% versus 2019 and decelerating sequentially due to calendar shifts. As we look to the year ahead, we expect system-wide top line growth of 2% to 4% versus 2023. We expect performance to be driven by continued growth across all major regions with international markets modestly outpacing the US. We also expect positive RevPAR growth across all segments, driven by continued recovery in business transient and group coupled with steady leisure demand. We expect continued recovery in small company meetings and large association and convention business to drive strong group performance. For 2024, group positions is up 16% year-over-year with small company's meetings increasing as a percentage of mix, further demonstrating the value of small and medium-sized businesses given higher rates and greater resiliency. Turning to development. We continue to see positive momentum throughout the year, opening 24,000 rooms in the fourth quarter, marking the largest quarter of openings in our history. We achieved several milestones in the quarter, including the openings of our 250th Tru Hotel and our 1,000th Hilton Garden Inn. We also reached 70,000 rooms globally for Home2. Additionally, we celebrated the opening of Signia by Hilton Atlanta, the city's largest ground-up development in over 40 years. The property, strategically located next to the Georgia World Congress Center and Mercedes-Benz Stadium, features nearly a thousand rooms and over a hundred thousand square feet of meeting space, including the largest hotel ballroom in Georgia. For the full year, we opened 395 hotels, totaling approximately 63,000 rooms and achieved net unit growth of 4.9%. Conversion activity remains strong, accounting for 30% of openings and demonstrating the strong value proposition our system continues to deliver for owners. Full service and collection brands represented the large majority of conversions and continue to gain traction with owners. Both Curio and Tapestry opened more hotels in 2023 than in any other year. Even with robust openings, our pipeline reached the highest level in our history, driven by record signings of 130,000 rooms, up 45% year-over-year and up 12% compared to pre-pandemic levels. At year-end, our pipeline totaled over 462,000 rooms with roughly half under construction following a strong year in construction starts. For the full year, starts increased 15%, driven by the US. We continue to have more rooms under construction than any other hotel company with approximately one in every five hotel rooms under construction globally slated to join our system. As we look to the year ahead, we expect continued positive momentum in signing starts and conversions to drive even stronger openings, boosted by our two newest brands, Spark and LivSmart Studios. For the full year, we continue to expect net unit growth to accelerate to the higher end of our 5.5% to 6% guidance range with the opportunity for further upside of 25 to 50 basis points from our exclusive partnership with Small Luxury Hotels of the World that we announced this morning. This partnership will meaningfully expand our luxury distribution as we expect to add the majority of their over 500 hotels to our system. Adding this extraordinary portfolio with a heavy orientation to resort locations to our already strong and growing luxury portfolio will further enhance a powerful network effect and give our guests even more opportunities to dream, book, earn, and burn points, and we're doing so in a capital-light way. The royalty rate will be in line with our existing brands, but fees will be paid only on the business driven through our channels. We expect over time to drive a meaningful portion of system revenues for SLH, and we'll start to integrate hotels into our system later this spring. Last quarter, we announced Hilton for Business, our multifaceted program designed to transform the travel experience for small and medium-sized businesses by providing a new booking website along with targeted benefits designed specifically for SMBs. The program launched in January with thousands of companies registering in just the first few weeks. SMBs account for approximately 85% of our business transient mix and comprise a meaningful and growing percentage of our group mix. Given its greater resiliency and higher rates, we think this important customer base provides significant opportunities to drive further growth. Overall, we remain focused on creating unique experiences in our hotels, including through innovative food and beverage offerings. We recently announced the launch of StiR Creative Collective, an in-house consulting and development arm that gives us the ability to work with our owners, operators, and hotel teams to elevate food and beverage offerings to meet the evolving needs of our guests. Several noteworthy StiR projects have already launched at the Conrad Orlando, the Canopy by Hilton in Toronto, and the new Signia in Atlanta. In a business of people serving people, our team members are at the heart of absolutely everything we do. We recently celebrated the remarkable achievement of being named the number one world's best workplace by Fortune and Great Place to Work. This recognition follows eight consecutive appearances on the world's best list and marks the first time a hospitality company has achieved the top honor in this best-in-class program. Additionally, for the seventh consecutive year, we were honored to be included on both the world and North America Dow Jones sustainability indices, the most prestigious ranking for corporate sustainability performance. Overall, we're extremely pleased with our performance, with our world-class brands and powerful commercial engines driving a record pipeline and accelerating net unit growth. We're confident in our ability to continue delivering value for all of our stakeholders in 2024 and beyond. Now, I'm going to turn the call over to Kevin to give a bit more detail on the quarter and our expectations for the year ahead.

Thanks, Chris, and good morning, everyone. During the quarter, system-wide RevPAR grew 5.7% versus the prior year on a comparable and currency-neutral basis. Growth was driven by strong international performance and continued recovery in group and business transient. Adjusted EBITDA was $803 million in the fourth quarter, up 9% year-over-year and exceeding the high end of our guidance range. Outperformance was driven by better than expected fee growth, largely due to better than expected RevPAR performance and license fee growth. Management and franchise fees grew 12% year-over-year. For the quarter, diluted earnings per share, adjusted for special items, was $1.68. Turning to our regional performance. Fourth quarter comparable US RevPAR grew 2% year-over-year with performance led by both business transient and group. Leisure transient in the US was flat with difficult year-over-year comparisons. Relative to 2019 peak levels, US RevPAR increased 11% in the fourth quarter, improving 100 basis points versus the third quarter. In the Americas outside the US, fourth quarter RevPAR increased 7% year-over-year with urban markets delivering RevPAR growth of 17% boosted by strong group business. In Europe, RevPAR grew 10% year-over-year with solid performance across all segments. Large events, including the Rugby World Cup in Paris, drove strong group performance across several key cities. In the Middle East and Africa region, RevPAR increased 12% year-over-year, led by strong rate growth. The COP 28 Climate Change Conference in Dubai, along with solid trends in Egypt, contributed to strong performance in the region. In the Asia Pacific region, fourth quarter RevPAR was up 42% year-over-year, led by continued demand recovery across China and Japan and notable strength across all segments. RevPAR in China was up 73% year-over-year in the quarter with RevPAR in the Asia Pacific region, excluding China, up 18% year-over-year. Turning to development. As Chris mentioned, for the full year, we grew net units 4.9% and ended the year with over 462,000 rooms in our pipeline, which was up 11% year-over-year with approximately 60% located outside the US and nearly half under construction. Looking to the year ahead, we are excited about our strong development story and the robust demand for Hilton branded products in both the US and international markets. Moving to guidance. For the first quarter, we expect system-wide RevPAR growth of 2% to 4% year-over-year. We expect adjusted EBITDA to be between $690 million and $710 million, and diluted EPS adjusted for special items to be between $1.36 and $1.44. For full year 2024, we expect RevPAR growth of 2% to 4%. We forecast adjusted EBITDA of between $3.33 billion and $3.38 billion. We forecast diluted EPS adjusted for special items of between $6.80 and $6.94. Please note that our guidance ranges do not incorporate future share repurchases. Moving to capital return. We paid a cash dividend of $0.15 per share during the fourth quarter for a total of $158 million in dividends for the year. For full year 2023, we returned $2.5 billion to shareholders in the form of buybacks and dividends. In the first quarter, our board authorized a quarterly cash dividend of $0.15 per share. For the full year, we expect to return approximately $3 billion to shareholders in the form of buybacks and dividends. Further details on our fourth quarter and full year results can be found in the earnings release we issued earlier this morning. This completes our prepared remarks.

We would now like to open the line for any questions you may have. We would like to speak with as many of you as possible, so we ask that you limit yourselves to one question. M. J., can we have our first question please?

Chris, I was hoping you can talk about M&A of brands. Obviously, there was an article earlier this week suggesting you might be close with the Graduate Hotels brand. If you want to comment specifically on this, but I would just love to get your overall view on opportunities for you to acquire brands. And then since it's something that you've been sort of not doing at all, maybe you can revisit some of the criteria for brand M&A.

I'm glad to address that, Joe. I anticipated this question due to the rumors circulating. Firstly, I'm not going to comment on specific market rumors or speculation. My stance on mergers and acquisitions remains consistent. Although we haven't made any acquisitions, I've always maintained that we shouldn't rule anything out. We have a stringent evaluation process. The first question we consider is whether an acquisition would add value to our existing portfolio of brands and enhance the product and customer experience we offer. The second crucial factor is whether the acquisition would positively impact the company's overall value. Over the past 16 to 17 years, we've reviewed many opportunities, and none have met our criteria. That's why we haven't pursued any deals. The current market environment is somewhat different, with increased stress due to interest rates and other factors, which may present more opportunities for modest acquisitions that I would categorize as tuck-in deals. However, we still uphold a rigorous evaluation process, and we are not making any announcements regarding acquisitions at this time. We have announced a strategic exclusive partnership with SLH, which we are excited about and will elaborate on later in the call. In summary, our approach hasn't changed; we continue to evaluate opportunities, and the current environment may offer more possibilities than we have seen in a while.

Chris, you obviously talked about the strength in business transient and group that you kind of foresee for 2024. Given those mixes respectively are down a couple of hundred basis points from pre-pandemic levels, I was kind of wondering where you think they settle for 2024? And what impact that mix shift has, obviously presumably taking away from leisure demand to some degree on ADRs for the year?

I believe that if we look at the segments broadly, as I mentioned in the prepared comments, we feel very positive about all the segments. Business transient continues to recover. Large corporations wrapped up the year still slightly below, probably around 5% off from previous levels, but ongoing growth is evident. Each segment varies slightly. Most segments showed relative strength and have either returned to or surpassed pre-pandemic levels, with the exception of banking, technology, and consulting, which were somewhat lower. However, when considering them together, they weren't significantly off. The SMB segment is at or above previous levels, and most of the other segments are as well. When we aggregate this for the fourth quarter full year regarding RevPAR, business transient led, yet occupancy was still somewhat behind. We anticipate that by year-end, assuming a generally accepted outlook of a soft landing, we will reach more normalized demand levels. Given the persistently low supply figures and ongoing solid economic growth, we anticipate maintaining pricing power throughout. On the group side, positioning has increased by 16%, marking a key leading indicator. Anecdotally, while meeting with our teams and sales leaders globally last week, I remarked that demand is exceptionally high. Every quarter continues to set new records for future bookings, showcasing robust strength. We believe group demand is quite solid, largely fueled by pent-up demand for activities that have been delayed, as well as new demand. We're noticing the resurgence of large association and citywide business, which tends to be more stable due to the planning and expenditure timelines involved. Thus, we expect group demand to lead our system. As for rates, which I'll address for both segments, we anticipate them to remain strong. There's such high demand, coupled with limited available space. Over the past decade, the number of hotels equipped with substantial meeting space has remained low. I was at a meeting yesterday planning our own sales and management conferences and noted we're scheduling events three to four years out due to space constraints in our hotels. Demand remains favorable, and with tight supply, we expect pricing to hold up well. Regarding leisure, we also see growth potential, likely more in terms of rates than volume. Our target consumer, with median income ranging from $140,000 to $150,000, still has ample resources and enthusiasm for travel, alongside the limited new supply. The overall economic conditions are favorable and have been positively influenced post-COVID. We expect leisure to grow but anticipate it will rank third in recovery after group and business transient. We maintain a positive outlook based on a general consensus that we're headed for a manageable soft landing with steady, albeit slowing, economic growth in 2024.

And then if I could, just a follow-up on Joe's question from earlier. The guidance for 2024, I'm going to assume that SLH and any kind of tuck-in M&A that you guys do in 2024 would be on top of the guidance that you provided this morning.

Correct. The 5.5% to 6% with a strong indication to the high end of that is pure organic. I said in my prepared comments, we think SLH depends on how rapidly hotels come in, which is why there's a range, 25 to 50 basis points on top of that. And if we were to do anything else, it's all on top of that. But that is the 5.5% to 6% we're leading towards the high end of it is pure organic.

Chris, wondering maybe you could build off of the last part there about SLH. And it’s pretty selective. But just A, can you give us a little bit more about the deal itself? And I think it sounds economically quite similar to what we see kind of in the normal course on the fee side, but any color you can provide there? And then I think more importantly is just big picture, do you think there are other collection and places out there that you could utilize your distribution capability and help other systems that may exist out there but not overlap directly with owners, which I know is going to be a sensitivity point for you.

We are very enthusiastic about our partnership with SLH, as you might have gathered from my earlier remarks. We've been collaborating with them for some time to make this work, and now that it's coming to fruition, we couldn't be more thrilled. It feels like everything has aligned perfectly for us. We're excited to add a majority of their unique 500 hotels, which are mostly small luxury properties with a strong resort focus that cater to niche markets, making them hard to enter. When we compare this with our current portfolio of around 100 luxury hotels and an additional 60 to 70 in development, we see very little overlap, as this is truly a distinct collection. Our extensive customer research and focus groups over the past year indicate that our higher-end clientele will appreciate this offering, allowing them to use our channels to earn and redeem points while enjoying vacations at these locations. We believe this combination is ideal and presents an incredible opportunity to expand our current luxury portfolio from about 150 to a potential 600 or 700 hotels located in some of the most desirable and unique destinations worldwide. Customers will love it, and we're eager to integrate these hotels into our channels. Economically, we feel very positive about this deal. The license fees we’ll receive align closely with what we normally see across our direct brands. A notable distinction, as I mentioned earlier, is that we will earn from the business we generate, which we expect will grow significantly over time. There’s solid economic potential here for us. Overall, this partnership is great for enhancing our network effects, beneficial for our customers, and favorable for our shareholders as we anticipate generating substantial fees without any capital investment, making it fully capital light.

And just as a follow-up there, Chris. Just any thoughts on, again, sort of future opportunities that could leverage the platform.

I think there are always various options we are exploring. Since the IPO road show, we have frequently discussed the network effect and our goal of building an ecosystem that attracts customers and fosters loyalty. We are continuously on the lookout for new opportunities, and I believe there are possibilities in that area. However, at the moment, we are concentrating our efforts on our current projects. This requires substantial work to integrate these elements into our system. We will evaluate any opportunities that allow us to continue attracting new customers and enhance our offerings for both new and existing customers, which would help us build loyalty and create monetizable solutions. At this point, there is nothing more to share beyond SLH.

Just to follow on the same theme. Is there a case or a strategy or thought around whether SLH could either naturally or strategically transition into a business use as well? I admit I've not stayed one. Is there any particular barrier to that as business people tend to choose smaller and smaller hotels, more unique properties over time?

There are no barriers to this. I want to highlight the resort aspect because, when you look at the percentage of their rooms and the number of hotels, many are located in resort areas. Currently, there are over 500 hotels, and this number is growing. It’s not static, and we believe we can help accelerate their growth by being part of our system. We expect to see the count continue to rise to 500, 600, 700, and beyond. While a significant number are resorts, there are also many small luxury boutique hotels in urban locations around the globe. The representation in urban areas is strong, and there are interesting urban markets where we currently lack luxury options. We believe this will appeal to both leisure travelers and business transient. It will attract some group business as well, though typically, these hotels have limited meeting space due to their nature, offering only small boardrooms and meeting areas. Therefore, leisure will likely be a primary focus, with business transient also being a significant contributor, especially in hotels situated in optimal locations.

If I can just ask about the locations geographically, what kinds of cities are in it now and where would they like to be, please?

I think if you looked at the map, I mean you can go on rather than me describing it, you can go on their website. I mean right now, it's sort of like 60% of it is in Europe, 20% in the US, 20% in APAC. The major cities in those markets, they have pretty much all of them have some representation. What you'll find if you went and then double clicked on that is that locations within those cities are pretty unique just because of what they are and where they are. So they're in niche, super hard-to-duplicate locations within most of those major cities.

I have a quick question regarding the SLH. To achieve the higher unit growth of over 6% that you mentioned you are comfortable with, what level of penetration would be necessary within the SLH portfolio in the first year to reach the 6.25% or 6.5% growth that you referred to with this partnership?

We believe that most SLH hotels will ultimately join our system, and we are confident in that. The main question is how quickly we can implement all the necessary technology, which we have been working on since we signed the agreement recently. The range of 25 to 50 is based on our comfort level, contingent upon how fast we can meet all the technology requirements. Accordingly, we feel optimistic about achieving the high end of 5.5% to 6%, depending on the pace of execution. In the next call, we will aim to provide more details as our teams are actively engaged in the project, and we should have a clearer picture by then.

And just, Kevin, could you just share with us what the year-end share count was?

I actually don't have the actual share count in front of me right now, Smedes. We'll follow up with you.

Just one more on SLH.

We're excited about it, too. So happy to have multiple speakers.

I mean, I guess the question is, when considering those hotels being added to the system, it seems likely that they will all eventually join. But do they need to opt in? And what does the process look like for those individual hotel owners? I guess I would have assumed they would all be…

They have to opt in, and we and the team at SLH have already started the process of communicating with them in that process, but they have the option to opt in. Now we think, as does SLH, at least the owners that we've discussed with that it's a compelling value proposition for them to be opting in, which is why we have confidence that the majority of the system ultimately will come in. But they have the option to opt in or not.

To follow up on that, these hotels initially chose SLH because they wanted to maintain their specific brand identity and independence, and we are essentially allowing them to continue doing that.

We're allowing them to keep all of that, they're not branding with us. The SLH brand is maintained. So it's the same branding they've had. We're just giving them access to hundreds of millions of customers, a loyalty program, all of our sort of commercial booking channels and the like, which obviously has proven to be, given the market share we drive in our system, quite a compelling value proposition. So we feel good about it for the same reasons we feel good about all of our development progress.

So looking at your pipeline, your rooms under construction looks like it's back almost to pre-pandemic levels pretty much. So I guess I'm just wondering what percent of your 2024 unit growth are you expecting to come from conversions?

We think we did 30%, as Chris mentioned in his prepared remarks this year. We think it will be a little bit higher than that, sort of in the mid-30s for the year this year.

And I know you're not guiding to anything next year yet. But is that something you expect to accelerate as a percent of your unit growth over time or do you think that we're seeing that sort of mid-30% range this year will be kind of the most, and then it will return to more normal additional supply under construction?

Over time, it will depend on market cycles, but I believe that with Spark, which is a completely conversion brand, it will gradually increase and become more significant. It has always been important, but I expect it to rise further over time. Of course, it will also fluctuate with market cycles in the long term.

With respect to the 2% to 4% RevPAR guide, Chris, I know you walked through this from a segment standpoint, and it's obviously early in the year. In 2023, you guys exceeded expectations in each quarter. And for '24, I think Smith Travel has a slightly more positive outlook than you guys. So could you kind of maybe kind of square that circle in terms of your process versus maybe how Smith Travel would do it? And then, I guess, more importantly, should we expect the international RevPAR, I know it's FX neutral, to be more positive for you guys than domestically?

We analyze insights from various experts, including Smith Travel, which is interesting, but our approach is based on data from each individual hotel, over 7,500 worldwide. This data helps us formulate a budget and establish a range around it. Our process is thorough, and while uncertainty remains, we tend to follow the consensus view that currently suggests a soft landing for the economy. Given what we observe in our business, that outcome appears to be the most probable. We've gathered this information on a property-by-property basis. Over my 16 years here, we have consistently grown our market share, including last year, and we're currently experiencing the highest market share levels in our history. If we perform well this year, we expect to grow our market share again, which should enable us to exceed overall market performance. Regarding international markets, I mentioned earlier that we expect international results to surpass those of the US, partly due to strong performance in EMEA and ongoing recovery in specific Asia-Pacific regions, particularly China. These factors are contributing to better performance internationally compared to the US.

Looking forward to more of that at the Investor Day.

This question is for Kevin. Just give us an update on how Spark is progressing. And then related to that, given the uncertainty surrounding what's happening with Choice and Wyndham, do you think that is helping with your conversion activity?

Look, Spark is going great. I mean, we've got nearly 150 of them in the pipeline already, and we just launched it last year. We've got another 250 working deals, something like that, so 400 working deals. We had eight or 10 of them open now that are performing really well. So we're picking up a lot of momentum. So we feel really good about the future of Spark and its value proposition. And I think I'm probably not going to comment on what our competitors might or might not be doing together. We believe strongly in the value proposition for Spark that's why we launched it, and we don't think that anything that goes on in the environment around us will change that trajectory or our ability to be successful in that segment.

I wonder if you could offer some thoughts on the trajectory you see from here on mid-scale and below chain scales, still up meaningfully versus pre-pandemic, but a bit softer year-over-year. How do you interpret that? And is there anything you see on the horizon that could drive some acceleration this year on the lower end?

I believe part of it is related to comparisons, as those segments bounced back from COVID quite effectively and swiftly. So some of this reflects year-over-year comparisons, which will always be present as cycles progress. We are confident in the demand for mid-scale offerings, which may lead to variations in year-over-year revenue per available room growth compared to other chain scales. However, in terms of reaching a large customer base, we estimate there are around 70 million customers within that chain scale or lower. For Spark and mid-scale transient stays, as well as LivSmart for extended stays of 30, 60, or 90 days, we have a positive outlook on the long-term demand and our capability to serve it. As Chris mentioned earlier, we aim to attract more customers into our system, while also generating strong returns for owners and increasing our fees. Our strategies are not dictated by year-over-year revenue per available room growth alone. While we anticipate capturing premium market share and outperforming competitors in these chain scales, year-over-year revenue per available room growth will still occur but isn't the primary motivation for our actions.

Sort of a two-part just first on development and signings, maybe where are you seeing the wins by brand, by region and kind of outside of the Spark momentum that you just mentioned. And then I guess, just specifically on Spark for the eight or 10 hotels. I know it's still early days there, but what are you thinking in terms of loyalty contribution and sort of earn and burn patterns from Honors members so far?

In the beginning, I'd say that the success has been quite widespread. We saw a 45% increase in signings, with a 31% rise in the US and even better results outside of the US, leading us to anticipate another record year in 2024. Our brands are performing well, and the industry fundamentals are solid. Despite perceptions about economic growth, we're facing a supply-constrained environment that will last for some time. In such conditions, we gain more market share; we mentioned that we currently have one in five hotel rooms under construction, which is more than any other hotel company. This gives us significant momentum, and property owners are eager to partner with us. Moreover, in a tighter lending environment, lenders prefer financing projects associated with our brands, not just in the US but globally, as they feel more secure about repayment. This momentum is noticeable across all brands, chain scales, and regions. Regarding your second question, it is still early as we are only working with a few hotels, but the performance of the Spark is showing reasonable to strong market share premiums and loyalty contributions. We believe we will attract many new members through these hotels because we can bring new customers into our system. It's not solely about whether they were members before they booked; some join while they are staying with us. While it’s early, we are seeing consistent performance across the board.

Just going back to SLH. Firstly, is this the luxury lifestyle launch you've teased recently or is that still to come? And then related, I guess, when other companies have done these kind of partnerships, they've seen some criticism that hotels are joining the loyalty program but a lower percentage of their revenues being handed over to Hilton. So how are you going to stop hotels from choosing the SLH route into Hilton Honors rather than maybe joining LXR or Canopy, or one of the other brands where they would pay across all of their revenues, the fee percentage?

We are not abandoning our luxury lifestyle plans; we are still actively pursuing them. I have been clear about our intention to enter this space this year and expect to do so sooner rather than later. It’s important to note that this initiative is quite different from what we are executing with SLH. SLH represents a unique proposition compared to existing brands like LXR, Canopy, Waldorf, and Conrad. These luxury hotels tend to be smaller and located in niche markets, and we believe they do not conflict with or cannibalize our current offerings. I encourage anyone to explore their website, which showcases over 500 hotels, to grasp the distinction. We have conducted extensive overlap analysis to ensure our understanding. It's clear that luxury lifestyle will have a different focus than what we are currently doing, including our luxury soft brand, LXR, which features larger hotels and more meeting spaces. While we operate over 7,500 hotels across various scales, identifying a complementary opportunity is challenging, and we believe SLH fulfills that role. We anticipate it will attract new customers and enhance the experience for our existing customers, particularly when it comes to earning and redeeming points, without conflicting with our current owners or growth opportunities within our brand portfolio.

You're referring to the impact of government subsidies from last year in the fourth quarter. If you're comparing year-over-year RevPAR to RevPAR growth, which is same-store, the subsidies come in below the revenue line.

Chris, I'm curious, there's quite a debate out there about inbound versus outbound, especially on the leisure side. You said you expect leisure to be up this year. I'm wondering what you're seeing in your system tells you that outbound travel is going to be as strong as last year, or if we're going to see more balanced playing field here in the United States?

I believe we're going to experience a significantly stronger inbound year, but that doesn’t imply that outbound will perform poorly. Last year’s dollar strength stimulated considerable international travel, particularly to Europe. Many people hadn’t traveled in a while, which contributed to a surge in outbound business. While I expect outbound travel to remain robust, this year’s trend will lean toward recovering inbound international travel, not perhaps fully, but getting much closer to full recovery by year’s end. The situation with Chinese inbound travel is a major factor, as it still represents a small fraction of previous levels. I anticipate that it will take a longer time to recover due to ongoing developments in China, although other countries are somewhat offsetting that decline. Therefore, we might not fully rebound this year. It remains to be seen, but I do believe that a key aspect of this year’s performance will be tied to inbound international travel, heavily concentrated in major urban markets. Additionally, the resurgence of big citywide and association events, along with small and medium-sized business (SMB) group travel, will benefit larger cities. I anticipate that by year’s end, we will have a much more positive outlook on inbound travel while still feeling reasonably good about outbound travel. However, inbound travel will be the highlight.

I do have a follow-up question, I'll make it quick here. But you a couple of times have kind of emphasized this low supply growth environment. The development pipeline continues to build. It's actually, I think, at all-time high levels. Your pipeline is a great example. I'm wondering if you're seeing any change in the pace of new construction starts or any indication that the period between signed deals and groundbreaking is starting to shorten? It feels like we got kind of a coiled snake out there, at some point, we're going to see some supply growth take off.

I believe that's likely. First, our numbers are quite strong. We are capturing a significant share of what's being signed and an even greater share of what's getting financed. Therefore, our figures do not truly reflect the overall market conditions. In the larger market, supply is around 1%. I agree with you; eventually, that should rise. Historically, the 30-year average is 2.5%, indicating that, based on long-term trends, it should increase, especially given the strength of our business and our expectations for continued performance this year. However, there are inherent limitations, which is why the supply stands at 1%. This low figure is a result of high construction costs, increased labor costs, and elevated interest rates, along with a lack of financing options over the past few years affecting the numbers. While some of these factors have stabilized—hence our double-digit growth in U.S. starts last year—financing remains a challenge. Although interest rates have slightly decreased, construction costs have stabilized but remain high. The overall economic situation is favorable, particularly for us, as we maintain a substantial market share and charge higher rates than most competitors, which benefits us further. Although the financing market has improved, enabling us to accomplish more last year, it’s still not robust, and a natural limitation persists. This constrained environment, while improving, is expected to remain for some time. It takes time to construct these projects. Therefore, this year we anticipate a slightly less constrained but still challenging financing environment that will ultimately work to our advantage. I believe that before we see significant progress transitioning from pipeline to construction, especially in the U.S., it will take a couple of years, followed by an additional one or two years for the construction itself. I feel optimistic about 2024, 2025, and likely most of 2026 being considerably below the 30-year supply averages, which explains my statements. It's simply a numbers game; at some point, projects need to move from planning to completion.

Could you give us an update on how you're thinking about fee growth for the year? If you still expect it to exceed the plus RevPAR, and any kind of puts and takes there?

We still believe that fee growth will be slightly above the algorithm as usual. There are a couple of challenges, including some headwind from foreign exchange, but despite that, we expect to be above the algorithm for fee growth this year.

And then one other quick one. Could you talk about any plans or your plans to get back into the kind of 3 to 3.5 times leverage range that you talked about?

Our guidance this year suggests that we will be nearing the bottom end of that range. We believe it remains the appropriate range for us. The borrowing environment has been somewhat challenging, and we are not satisfied with the current rates. However, our capital return continues to improve, and we have provided guidance for this year, which indicates that we will likely be at the lower end of that range by the end of the year.

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 closing remarks.

Thank you, everybody, again, for taking the time. Obviously, a really good year for us last year, some exciting things going on with SLH, but even the organic growth and increases in unit growth that we see, given the momentum we're taking from last year into this year. We feel really good about the progress of the company. We feel really good about where things are and the outlook for the full year. And we'll look forward to catching up with you after the first quarter to give you an update. Thanks again, and have a great day.

The conference has now concluded. Thank you for your participation. You may now disconnect your lines.