Hilton Worldwide Holdings Inc (HLT) — Q1 2026 Earnings Call Transcript

Thank you, Chuck. Welcome to Hilton's First Quarter 2026 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 financial measures discussed in today's call in our earnings press release and on our website at ir.hilton.com. This morning, Chris Nassetta, our President and Chief Executive Officer, will provide an overview of the current operating environment and the company's outlook. Kevin Jacobs, our Executive Vice President and Chief Financial Officer, will then review our first quarter results and discuss our expectations for the year. Following the remarks, we will be happy to take your questions. With that, I'm pleased to turn the call over to Chris.

Thanks, Charlie, and good morning, everyone. We certainly appreciate you joining us today. Before we begin, I'd like to acknowledge all those impacted by the Middle East conflict, and I'd like to thank our team members who adapted very quickly and continue to provide extraordinary hospitality during this difficult time. We remain hopeful for a swift resolution. Turning to results. We're pleased to report a great first quarter during which strong RevPAR and net unit growth drove top and bottom line results above the high end of our guidance. Performance was driven by strengthening underlying demand trends along with ongoing system-wide share gains. Our industry-leading brands, strong commercial engines and powerful partnerships continue to differentiate us from the competition, while a culture of innovation fuels additional growth opportunities. All of this, coupled with our asset-light fee-based business model, positions us to continue producing significant free cash flow and driving meaningful shareholder returns. In the quarter, we returned more than $860 million to shareholders and we remain on track to return approximately $3.5 billion for the full year. For the first quarter, system-wide RevPAR increased 3.6% year-over-year, driven by broad growth across all chain scales, brands and segments, as well as sequential monthly improvement throughout the quarter in the U.S. In the quarter, business transient RevPAR was up 2.7%, representing a 4-point step-up in demand from the fourth quarter when adjusting for day of week and holiday shifts driven by improving midweek demand across all chain scales. Leisure transient RevPAR was up 3.5%, driven by concentrated spring break demand that enabled strong rate growth. Group RevPAR was up 4.3%, driven by growth in company meeting and convention demand. We continue to see healthy underlying momentum for group supported by strong growth in corporate lead volumes. As we look ahead to the second quarter, we remain encouraged by a continuation of demand trends that we've been observing since late 2025 and now through April, but we do expect some headwinds related to the Middle East. For the full year, we expect improving performance in the lower and mid chain scales with RevPAR strength continuing to move downstream from luxury and upper upscale toward a more balanced convergence demand shape, or what I have been calling a C-shaped economy. This trend should be most evident in the U.S., where supportive tax and regulatory policy, expected lower interest rates, increased private sector investment in AI and the AI complex and ongoing public infrastructure spending are benefiting the middle and lower income consumer and driving broader demand growth. As a result, for the full year, our system-wide RevPAR growth expectations are now 2% to 3%, factoring in a range of scenarios for the Middle East conflict and recovery. For the year, we continue to expect group to lead, followed by business and leisure transient. Turning to development. During the first quarter, we opened 131 hotels totaling over 16,000 rooms representing our second strongest first quarter for hotel openings in our history. Our Luxury and Lifestyle brands continue to expand around the world, comprising 20% of total openings in the quarter. Earlier this month, in Morocco, we proudly opened the Waldorf Astoria Rabat Sale kicking off 2026 with another key addition to the Waldorf Astoria portfolio, which now includes 40 trading hotels worldwide with more than 30 in the pipeline. Additional marquee Waldorf openings in 2026 will include the Waldorf Astoria Admiralty Arch in London and the Waldorf Astoria Kuala Lumpur in Malaysia. Within Lifestyle, our Curio Collection recently surpassed 200 trading hotels with notable openings in the quarter, including the newly built Monarch San Antonio and the converted hotel here in Alexandria, Old Town, Virginia. We also expanded our Lifestyle footprint globally with the debut of Motto in Brazil. In Europe, this week, we will open a Home2 Suites in Dublin, Ireland, which marked the European debut of our Home2 Suites brand, one of our strongest performing brands in the portfolio with more than 800 hotels open and over 750 in development. This positions this brand for extended rapid growth and allows us to capture even more demand from this important region. Conversions represented 36% of openings for the quarter across 10 brands and dozens of countries, ranging from flagship Hilton openings in Malaysia, Vietnam and Thailand, Spark openings in France, Canada and the U.S. Following our Apartment Collection by Hilton brand announcement earlier this year, we now have our first two converted properties in Atlanta and Salt Lake City, accepting bookings for this summer. Conversions overall are expected to be up on a nominal basis in 2026 across every region, demonstrating the performance our system delivers to owners. Despite the current macro uncertainty, signings and starts continue to have momentum. During the quarter, we announced multiple new signings across geographies including four new brand signings in Turkey, two LXR signings in Japan, the debut of Motto in Australia and France and the debut of Tapestry in Germany. In India, we signed a strategic agreement with Royal Orchard Hotel to open 125 Hampton Hotels in the market, which puts us on track to exceed 400 hotels in the market in the coming years and reaffirms our commitment to expanding in this key emerging economy. We continue to build out our presence in the fast-growing and expansive region of APAC ex China, where approvals, openings and new development construction starts were all up double-digits in the first quarter. Globally, we now expect new development construction starts to be up over 20% for the year with the strongest growth in the U.S. and EMEA, signaling continued developer confidence and a strong desire to have hotels open in conjunction with a rebounding RevPAR environment. Our pipeline now stands at a record 527,000 rooms and includes brand introductions in more than 25 new countries. With Hilton representing only 5.5% of global hotel supply and over 20% of rooms under construction, we have tremendous opportunity to grow our market share from here. As we look ahead, we expect that our robust global pipeline strength in conversions, construction start momentum and industry-leading brand premiums will support sustained net unit growth of between 6% to 7% for the full year even with the current geopolitical uncertainty. Innovation across our entire business is a core competency, and when deploying new technology, we're focused on broad impactful use cases to enhance the guest experience, deliver value to owners and empower team members. As we advance our strategy, we're leveraging AI to embrace the new ways customers are discovering and engaging with our brands, working with leading partners, including Google, ChatGPT and Anthropic, all while remaining focused on strengthening direct loyalty-driven relationships and maintaining discipline in how we manage distribution. Building on this, earlier this quarter, we deployed an Anthropic-powered platform for customers to dream and shop called the Hilton AI Planner. This large language model powered tool combines our incredibly rich property content with vast information about local venues and activities to allow customers to search for and tailor an experience that is unique to their interests. The AI Planner enables guests to spend more time dreaming within our native environment which should drive incremental demand across our portfolio as customers book with us more often and more quickly. We're just getting started on how technology can customize the customer experience, and the Hilton AI Planner is one great example of how we are delivering our signature Hilton hospitality and enhancing the Dream, Shop, Book and Stay guest journey. During the quarter, we were proud to once again be recognized as the top-rated hospitality company on the Fortune and Great Place to Work list of the 100 best companies to work for in the United States, marking our 11th consecutive year earning this distinction. We also continue to be recognized for our world-class culture globally, receiving Great Place to Work honors in 17 countries, including seven #1 rankings. Overall, we are very encouraged by the strength of the demand environment across all our brands. We remain confident that our powerful network effect, industry-leading RevPAR premiums and fee-based capital-light business model will continue to drive strong operating performance, net unit growth and meaningful cash flow, enabling us to return an increasing amount of capital to shareholders. Now I'll turn the call over to Kevin to give you a few more details on the quarter and expectations for the full year.

Thanks, Chris, and good morning, everyone. During the quarter, system-wide RevPAR increased 3.6% versus the prior year on a comparable and currency-neutral basis. Growth was driven by broad growth across all chain scales, brands and segments as well as sequential improvement throughout the quarter in the U.S. Adjusted EBITDA was $901 million in the first quarter, up 13% year-over-year and exceeding the high end of our guidance range. Outperformance was predominantly driven by better-than-expected system-wide RevPAR growth. Management and franchise fees grew 10.4% year-over-year. For the quarter, diluted earnings per share adjusted for special items was $2.01. Turning to our regional performance. First quarter comparable U.S. RevPAR increased 3.4% driven by group growth trends continuing from the prior quarter, broad business travel strength and leisure demand from a concentrated spring break. For full year 2026, we expect U.S. RevPAR growth to be at the high end or above system-wide guidance. The Americas outside the U.S., first quarter RevPAR increased 4.4% year-over-year, driven by strong demand across all segments and continued strength across the Caribbean and South America. For full year 2026, we expect RevPAR growth to be in the low to mid-single digits. Europe, RevPAR grew 6.9% year-over-year led by growth across all segments. Continental Europe's strength related to the Winter Olympics and other regional event-driven demand. For full year 2026, we expect RevPAR growth to be in the low to mid-single digits. In the Middle East and Africa region, RevPAR decreased 1.7% year-over-year as strong early quarter performance was offset by weakness following travel disruptions from the conflict across the Middle East. For full year 2026, we expect RevPAR to be down in the mid- to high teens as a result of the ongoing conflict in the region, and we expect the biggest impact to be on second quarter performance. In the Asia Pacific region, first quarter RevPAR was up 9.1% in APAC ex China, led by Australasia RevPAR growth and extended Chinese New Year and other regional events. RevPAR in China increased 1.3% in the quarter, driven by business segment recovery, but offset by continued pressure in group from softer convention and company meetings activity and leisure due to weaker inbound travel. For full year 2026, we expect RevPAR growth in Asia Pacific to be low single digits, with RevPAR flat in China. Turning to development. As Chris mentioned, for the quarter, we grew rooms under construction 6.3% and now have more than 527,000 rooms in our pipeline. 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 the Hilton portfolio. We expect to deliver between 6% to 7% net unit growth for the full year. Moving to guidance for the second quarter, including the impact from the Middle East conflict, we expect system-wide RevPAR growth to be between 2% and 3%. We expect adjusted EBITDA to be between $1.015 billion and $1.035 billion and diluted EPS adjusted for special items to be between $2.18 and $2.24, both impacted by the significant Middle East RevPAR decline and several one-time and timing items that are unique to the second quarter year-over-year comparison. For the full year, we expect RevPAR growth of 2% to 3%, driven by strengthening underlying fundamentals across chain scales and segments and factoring for a range of scenarios for the Middle East. As a result, we expect adjusted EBITDA of between $4.02 billion and $4.06 billion and diluted EPS adjusted for special items of between $8.79 and $8.91. 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 first quarter for a total of $35 million. Our Board also authorized a quarterly dividend of $0.15 per share for the second quarter. For 2026, we expect to return approximately $3.5 billion to shareholders in the form of buybacks and dividends. Further details on our first 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. Chuck, can we have our first question, please?

Chris, obviously, a big notable change in the U.S. demand dynamics. So hoping you could just unpack that a little bit for us. Our math gets us to probably nearly a 200 basis point increase in your outlook from where you were at the beginning of the year. So could you just walk us through that and maybe elaborate a little bit on your comment around C-shaped economy? Are you actually seeing some evidence of that convergence as we get here into April? Or what gives you that confidence to kind of make that statement? What are you seeing that's getting you excited about the business?

Thanks, Shaun. That's a great way to start the Q&A because it’s the biggest question. If you go back to midyear last year, I believed that, above the noise, there were solid macro fundamentals in the U.S. economy that would eventually translate into higher growth rates. I acknowledged that in the third quarter we weren’t yet seeing clear green shoots, but I kept saying we would have to start to see convergence rather than a K-shaped recovery, where lower-end, middle-class and mid-priced segments begin to move up. In the fourth quarter we started to see some evidence of that. Now we are in the first quarter looking into the second quarter, with part of the quarter behind us and good sight lines into May, and we are seeing it. It takes time for these trends to deepen into the economy. What’s driving it are several big-picture factors. Setting aside the recent spike in energy prices tied to the Middle East, inflation, especially in housing, is coming down and, broadly speaking, interest rates have eased. You can debate the timing for further rate cuts, but if geopolitical tensions calm, we should move into a lower inflation environment that allows the Fed to reduce rates and stimulate the real economy. We’re also operating in a deregulatory environment across many sectors, and the tax bill passed last year created multi-year, business-friendly tax attributes that are unlikely to be reversed quickly. That gives companies a multi-year runway of favorable tax policy. There is significant investment taking place in the U.S., particularly around AI and its ecosystem, data centers and energy, and in infrastructure from the $1.6 trillion package, much of which has yet to be spent. The CHIPS Act to reshore critical manufacturing similarly represents large funding that will be deployed over time. These projects require land, permits and construction, so they feed into the economy over several years. Historically, demand growth for hotel rooms has tracked very closely with nonresidential fixed investment. Post-COVID the relationships got messy, but over the long term RFI drives our business and the mid-market. RFI numbers are moving up, and I expect them to continue rising over the next several years, which will drive the convergence we’re discussing. AI should also deliver a major productivity boom, comparable to or larger than the internet’s impact. While there will be displacement and a need to retrain workers, big productivity gains have always been associated with substantial economic growth. Putting all of that together, I believe these dynamics are happening and are starting to show up in our business. I don’t want to overstate it — we’re seeing gradual improvement since the fourth quarter into the first and now the second quarter — but performance has been improving week to week. With the visibility we have in the U.S., the outlook feels better. The situation in the Middle East adds uncertainty, and we tried to be conservative in our full-year guidance, but I think that guidance is reasonable.

I suppose I'll take the bait on the Middle East there. Can you just remind us what the exposure in terms of EBITDA or fees across your businesses there? And how do you think about the Middle East dynamic and disruption there flowing through to the other regions of your business throughout the course of the year and impacts the U.S. outbound travel?

Sure. The Middle East is about 3% of the business, so on the surface it's not a large part of the business. But in Q2 it is being impacted by a few things, including some one-time items Kevin mentioned from last year, and also by the situation in the Middle East. For Q2, which we think will be the most dramatically impacted quarter, if a 3% region is down 50% you can do the math — that could be about 1.5 points on a system-wide basis. So whatever guidance we gave you, if the Middle East were doing what it normally does, which had been running in the high single digits to low double digits, and instead it is down 50% for a quarter, that flips things so you would be above where you were in Q1. Even though it is a small 3%, a small percentage of a large number can become a meaningful number. Having said that, I don't know exactly how this will play out. I'm looking out my window at Washington and we'll see. I suspect there will be an off-ramp eventually, given many political and other factors in the not-too-distant future. Things have already settled down a bit, and in my weekly check-ins I'm starting to see certain larger markets in the Middle East stabilize and move up. They are still quite impacted, but they are getting better. In our guidance we tried to be conservative and present a range. In the first quarter we think the impact was probably 30 to 40 basis points. In Q2, as I said, it's probably about 1.5 points. For the full year, we estimate roughly a 0.5 to 1 point impact depending on the trajectory. At the lower end of that range, and thus at the lower end of our overall guidance, we've assumed it stays pretty bad and that there is some knock-on impact to other markets. We have seen a little of that already — a bit in India, particularly Bangalore, and a little in the Seychelles and Maldives because of transit through Dubai — but not a lot. We have assumed that if the situation remains severe, there will be a bit more knock-on impact. On the upside, things could continue to stabilize and recover, not necessarily in a sharp V-shaped way but grinding back up through the rest of the year. I've been doing this long enough to have lived through wars, pandemics, and other disruptions, so in this moment we're trying to be responsible and give you a rational range of outcomes that is, if anything, probably conservative. On the development side, only about 2% of our deliveries for the year are coming out of the Middle East, but those are important deliveries and we do expect some slowdown there. It's early in the year and uncertain, which is why we probably would have been in the upper half of our 6% to 7% range absent this. Because of the Middle East and the potential for supply-chain knock-on effects elsewhere, we felt it was more appropriate to keep the range where it was. You could say we're being too conservative, but there are many possible outcomes and we've tried to frame and think through them carefully.

I appreciate all the color on the macro. As we look at some of the actions outside of RevPAR, particularly the launch of the Select brands. Can you elaborate on how this compares to a typical brand agreement? And what are some of the guardrails for what brands you'd be willing to include going forward? And if I can just sneak one more related, does this launch change the way you think about either the marketing or system funds allocations or even M&A?

No, on the last part of that, I'll answer it. That doesn't change any of that. The way to think about Select is like anything we bring into the system: the first step is quality. Does it add to our network effect? Is it a swim lane or a brand our customers want, with the quality we promise to deliver, and will it strengthen our network effect? That's always the first filter. If it doesn't meet the criteria — for example, if we already have something similar or the quality isn't right — we're not doing it. We have had dozens of Select opportunities you don't know about because we didn't pursue them. We've done one so far. I suspect there will be others, but I don't know how many because we're very stringent about what we'll do. The hotel is a great example. It's a smaller brand that customers love, the quality is good, and it has a real following, but it has struggled without global scale and the network effect, plus the ability to invest in technology at the level we do. That created a unique opportunity for us. We like the brand, we've done a lot of work, we think our customers will respond well, and the quality is good. Importantly, we're entering an agreement consistent with how we approach any franchise relationship. If you look at it on a run-rate basis, it's consistent with how we charge license fees and system fees, and it's fee per room, consistent with that product category. The difference is it's a somewhat unique brand. Could you do it somewhere else? Yes, but the hotel doesn't fit in TAP or Curio; it's its own thing. We didn't want to create cognitive dissonance with our customers as we bring things into the system. We wanted it to stand on its own, done the right way, where we get paid for the effort and it genuinely enhances the broader system. There will be others; we're working on a bunch, but our turndown ratio is very high. The appetite among small brands is strong in an environment where we have significant scale, the way we work with intermediaries, and the dollars we can invest in commercial engines and technology. That gives us a real competitive advantage and is why the average market share of our brands is much higher than our competitors. Increasingly, some micro-brands around the world are recognizing that. We've been talking to many of them. I do suspect others will come into the fold over time, but we'll be hyper-disciplined about it: quality must be right, the brand must fit our ecosystem, the fees per room must be appropriate, and we must be paid for our efforts.

I wanted to go back to the AI and kind of technology side of things. Obviously, things are moving very, very quickly. You mentioned you launched the Hilton AI Planner. But I guess just now another quarter into things, how do you think about what the kind of real opportunity set here is, long term, both obviously on the OpEx side of things internally, but then as you think kind of bigger picture externally from the distribution side of things also?

Yes. I mean we talked about this, I think, at fairly good length on the last call and it's obviously an important question. And given the amount of time we're spending on it and everybody is, it would be fair to say it's worth addressing. I would say you're right, a lot of effort going into it by everybody certainly by us. Things are moving very quickly. I would say as every day goes by, we're learning and iterating and thinking and doing different things and working with different partners in different ways. And I think the opportunity gets more not less interesting — I know that's what you'd expect me to say, but I believe it to be true. I think the three buckets of how we think about it haven't really changed. I think we think about this as a means to create — to use our scale as a weapon and creating efficiency, which we think can translate into being more efficient at how we go to market and how we deliver for our owner community and more effective. And yes, that could benefit our P&L, too, but really, the largest part of our system cost really relates to the part of the system we manage on behalf of owners. So every time we can be more effective and more efficient in the world, it can translate into benefits for our owner community who need it and want it and deserve it. Our Project Rise this year was in part enabled by work that we're doing in this bucket, if you will. And so I'd say we're early days, and I think you have huge opportunities to think about systems and processes across what is a very big global company, to continue to garner efficiencies but most importantly, to be much more effective, be able to move quicker, add hotels, ramp them quicker just because we take great systems but antiquated systems, and we hyper-modernize those. In the second bucket, you heard me mention, we're working with a bunch of the folks out there, Gemini and OpenAI, we're going to be opening our app within their environment in the next couple of weeks, talked about our AI Planner in our environment that we did with Anthropic and Claude. We're working with everybody, and while it's moving fast, there's a long way to go. And so I do increasingly feel really good about what the opportunities for us are. I mean if you think about it at a high level, if you look at the quality hotel market in the United States, we're over 25% of the market. I think that puts us in — and we are the only ones with that 25% of the market that can control rate inventory availability, period, end of story, nobody can get it, unless we give it to them. In a world where you have a more competitive environment, there are a bunch of debates who's going to win, who's going to lose. That's not for us to judge. I think they're probably going to be more than one winner. That's why we're working with everybody. But we realize the asset we have in the system and the control of the system, given our scale is really valuable that effectively, people really do need us if you're going to have — you can't be missing 25% or 30% of the quality inventory in the U.S. and have something that's a real full offering. And so I like where we sit. It's complicated. It's fast moving, there's risks, but we're approaching it very much in the form of a partnership with all of the counterparties that are developing these technologies. We want to show up with all of them. And in the end, I do believe as a result of the great work they're doing and a result of discipline on our side, that there's real opportunities to create more efficient, more effective distribution. They sort of just has to be if we're smart about it, and we intend to be. And then the last bucket, AI Planner is, in fact, part of it. And if you think about when we have a stay experience people are with us, your customers, we have all sorts of opportunities to equip our team members now with all the information we have with technology in the palm of their hands to deal with problems to customize the experience. And we're testing and learning in the stay experience with really cool things that really revolutionize the stay. But we also, a lot of the engagement we have with our customers is digital. Think about when they're dreaming, booking, planning, post-day. And so that's about trying to make sure that the approach we have digitally with folks is utilizing all the best thinking and technology to create a very engaging experience so that, yes, when they're with us, they have the best day experience in the business, and that's why they want to come back — but when they're not with us and these other steps of the customer journey, they feel equally good about our ability to satisfy their needs and to customize at mass scale. And so again, all this stuff, I mean, we're doing things. We talked about it, you can go play with the AI, the Hilton AI Planner, it's early days, but we're doing super important foundational work. And the last thing I'd say is our tech stack and it's not by happenstance is very advanced. So many years ago, COVID turned it to a time warp, but pre-COVID, probably eight or nine years ago, we made the decision to really completely blow up all our legacy architecture and make sure that our core systems and otherwise were cloud-based, open source, microservices driven, which means a totally modern tech stack that has incredible agility and the ability to control. So it's a system built on certain elements of table-stake technology, it might build off an existing platform. But where we customize and modify it, it's things we own and control. And so it gives us, we think, a really unique ability to be agile and do things for customers that are going to be unique that others with monolithic providers can't do. And so that was a very purposeful decision to my tech team. They're extraordinary and leading that effort over a bunch of years. And I would say it just puts us in a really good position in the world we live in, where AI is coming and you have all this opportunity. But if you don't have the flexibility and agility of a tech stack, it doesn't really matter because the machine stops. So that'll leave it at that. We could talk AI all day, and we do around here, talk about it a heck of a lot, but that's probably enough for today.

Just wanted to follow up on the expectation for conversion to be up in 2026 across every region. Do you think this is a new normal for conversions moving forward? Or will we revert back to a more normalized conversion level versus new construction mix? And is there anything to think about from a fee perspective, longer term, if conversions continue to be a greater portion of the fee mix moving forward?

I don't think there's any material impact on the fee side of it. So answering that first. This year, we're going to tick up, as I said, last year, we were like 36%. Current forecasts are we're trending a bit above that, probably 38% to 40% in the latest numbers. I mean there's a lot of moving parts under the year, for the year. But we think it's going to be up modestly. I actually think the math of it is such that on an absolute basis, I don't think you're going to see a big drop off in conversions. As a percentage of new openings, I do think you will see it moderate over time, but that's because you've been in a world where construction starts haven't really gotten back to pre-COVID levels. And that will happen and is happening. It probably happens this year. And as you start to have that happen over the next two or three years, and new construction grows in an absolute sense, I think the percentage will decline. I don't think it will ever go back down. I mean, we peaked during the great recession in the low 40s. We're sort of back there now. It went as low as the high teens. I don't think we're going to be in a world where it's high teens. I mean when it was high teens, let's be honest, we had one brand, Hilton and DoubleTree when it went. Now we've got a dozen brands that are really good candidates for conversion. So I think you're probably sort of permanently in the 30% to 40% range. I'm making that up. But I mean, directionally, if you did the math on new starts, I think you're sort of permanently in that range.

Thanks for taking my question. I know you said you'd like to sort of leave the AI discussion right where it is. But I wanted to ask something just a little more industry level, if that's okay, which is — it's obvious that you're making great progress in working at terrific speed. Outside the industry, not talking about competitors or peers, right, there is sort of an independent track that's going on, and there's also an OTA environment that's also, I assume, moving as fast as they can. How do you envision those dynamics sort of playing out? And do we evolve into kind of a different industry landscape in that regard? Or are you just running your race and luckily not paying a ton of attention to what they're doing?

No, of course we are paying a lot of attention to what everybody is doing. On the margin, it will look a lot like it does over the next five years from now, it will look a lot like it does today. I think on the margin, though, if we do our job, I think AI allows us, as I said, to be more efficient and more effective. What we did that is, code for continuing to build more direct lines to our customers. I mean that's where we have a terrific relationship with the OTAs, and we do a certain segment of our business with them. And I suspect we will for a very, very long time. But I think our ability — our control of our inventory, our ability to customize the experience in unique ways, it being a more competitive environment where there isn't just one winner in search probably when it's all said and done. I think that puts us in a position where — it gives us an advantage relative to what we've had to continuing to build more direct business. Now 80% plus of our business is already direct. So we've had a fair amount of success in doing that. But I think on the margin, it helps in that regard. But I go back to where I started. I don't see that the whole system changes in a material way anytime soon.

My question is not about AI. Just looking at results, fantastic results, and I think that full year RevPAR rates higher than the market was expecting. I am curious, last quarter, you had a slide that showed that a 100 basis point raise in RevPAR would be a 100 basis point raise in EBITDA. And it looks like it's maybe sort of more like a 50 basis points raise in EBITDA. Your G&A didn't change. Just anything else you would call out in that sort of flow through to EBITDA from the rates?

No, Robin, I think look, I think the rule of thumb we would use and maybe the 100 basis points was a little bit of rounding and I think we've actually updated that more recently. The rule of thumb we do is about $25 million or $30 million of EBITDA per point. And so we raised our guidance — our RevPAR guidance by one full point. So if you think about that as being typically $25 million to $30 million, the things that are going on there is you just have the impact of the Middle East with a little bit of IMF and a little bit of FX, which caused us to raise the midpoint by 20 instead of, call it, 25 at the low end of the range. So that's the way to think about it, and it's not more complicated than that.

So back to demand, you sound really good on group business. That was that was sort of the downside surprise for the industry last year, obviously, with tariffs. And just sort of curious, when you think — when you look out and expect group to lead, are you actually seeing in the year, for the year group bookings materialize better than planned? Or is it really just sort of easy comps that give you that confidence?

No. I mean we're seeing real lead volumes and bookings in line with the forecasting we have. And atmospherically in the discussions that our sales folks are having broadly about sentiment in that space and the corporate space, for that matter, are much better, quite good. So they get — I think, listen, people are feeling better when they're spending more — they need to move more, they need to aggregate people more, and we're seeing it show up. The booking position supports it, the leads more than support it.

Just getting back to net unit growth, to the extent that the disruption in the Middle East might cause some impact on 6% to 7% growth this year. Is that just some of the either conversions or new builds kind of fall out of the system or the expectation of you were not at the high end of that range for this year. Would most of that fall into 2027?

It's just timing. We don't — we're not concerned that anything is falling out of the pipeline, or conversion opportunities are drying up. It's just like there's a lot going on over there and some people have slowed construction, they've slowed decision-making on conversion deals that we're working on. So I don't think we feel like any of it ultimately falls away. I think it's a question of when it gets done. And it's early to say. By the way my team says it's picking up by the day, like Saudi Arabia, sort of isn't missing a beat, UAE a little bit more disrupted, Kuwait, Qatar, much more so because the issues there have been more dramatic. So really, it's not like one monolithic area. It's country by country. And so we're watching it carefully. But I think it's — I don't think these are things that disappear. I think it's just a function of — it may push a quarter or two.

Just to stick on that theme. As you think about your share of rooms versus much larger share of rooms under construction. What markets do you feel like that disconnect opportunity is biggest? Basically, what geographies offer the best share gain opportunity as you look out maybe over the next five years?

Well, there are a lot of them. I would say where we have what we call inside the company's springboard work, which is where we see sort of the disconnect in terms of demand for our products and what is a relatively low existing base of hotels. So I would say India being first and foremost, I mean we think easily, it's a 10x or 20x sort of opportunity. We have whatever, 40 hotels in India. I mean with the deals like when we announced today, we sort of have 400 in and around the pipeline or under development. So India is definitely one. Southeast Asia is another where we have a big presence, but we think the opportunity is to be three to four times the size that we have. The broader Caribbean and Latin America environment. We've got a big presence of 300 hotels, but we think we could be easily two to three times that size. KSA, we have 25, 30 hotels. We think we can easily be four to five times that, probably even more as well as other parts of the Middle East. Obviously, the Middle East, we just talked about, there's some challenges, but in part because I'm always an optimist, but I do think one way or another, this will settle down, and there's a lot of momentum underlying travel and tourism in the Middle East that I think will pick up pretty quickly when you get to the other side of this conflict. So I mean — and I shouldn't forget Africa, where a huge population, we've been there for many, many decades, but have a relatively small base and a huge opportunity. And so yes, the reality is we've got 27 brands. And if you look at the average number of brands that's deployed in any market, I think it's like four brands with 27. So even where we have more density, there's a tremendous amount of network yet to build and thus growth and then the markets I just covered, I would argue and almost all of them other than maybe the more mature markets where we have 300 hotels, the others were in sort of our nascent stages. The brand is well known. We performed really well. We've had a presence in a long time. But relative to the populations and the demand base, we're just getting started. So that's why we get really excited when we think about — I get the question, well, how long can you grow 6% or 7%? And my view is a long, long time, simply because the world is a big place, populations all over the world need to be served. In most of the markets I just described, they are way underserved relative to any of the other more mature markets. And yet our brands do well there. Customers recognize us, and it's an opportunity to really build a powerful network effect in many of those places.

Thanks, everybody. As always, we appreciate the time. As you can tell, there's a lot going on in the world. There's no question about it, the Middle East is not helpful. But 75% of our business is still driven out of the U.S., and we have seen a really nice uptick in performance driven by a really nice uptick in demand across all segments. We think that is sustainable as we look out for the rest of the year and beyond. And so notwithstanding everything going on in the world, we feel really good about our ability to drive top line, drive unit growth, obviously, the free cash flow that we need to drive and keep returning capital as a serial compounder. So we feel great about the business. Look forward to catching up with you after the second quarter to give you the update on everything going on.