So as Scott mentioned, our capital allocation strategy is unchanged. We’re going to continue to invest in our brands and in our business. And a lot of what we talked about in the prepared remarks was really related to those, and those are really paying off. When you look at the convention we had last week, we had 6,500 — over 6,500 people at that convention. And a lot of the excitement around brand refreshes for Sleep Inn, for the Comfort Inn, Rise & Shine prototype. All of those investments are things that we are going to continue to make to keep the brands relevant and fresh, and then look to launch new brands or relaunch in the case of the Park Inn brand. So those investments continue to be something we’re able to do, including looking at the tuck-in M&A.
When we did the Radisson acquisition, that was something we were able to do effectively with our current capacity without taking the leverage levels up. So it’s a really a reflection, I think, of the growth of the business, the size of the business and the free cash flow generation we have that allows us to do all of that but stay within that 3x to 4x range.
Stephen Grambling: And then one other clarification. Just in response to the last question where you were referencing the mismatch and the reimbursed costs versus reimbursed expenses, and I think you said $10 million a quarter. Is that going to continue into next year [indiscernible] I guess I just want to make sure that I understand if that’s recurring or not.
Scott Oaksmith: Yes, those are recurring fees. So on an ongoing basis going forward for the quarter — for the rest of the year, it’s $8 million to $10 million per quarter, but that will continue into 2025. And then obviously, we’ll be looking to grow that as the size of our portfolio continues to grow and our consumer reach continues to grow.
Operator: Your next question comes from the line of David Katz from Jefferies.
David Katz: Number one, I know you sort of talked about RevPAR. But could you maybe give us a bit more insight about RevPAR cadence for the remainder of the year, whether that’s exactly or relative or qualitative as possible. And then my follow-up is, post the endeavors with Wyndham, were there or are there any opportunities that may have been on hold that may be coming back to life or becoming more active now that you’ve moved on from that?
Patrick Pacious: Sure, David. So let me just start with the sort of seasonality of RevPAR, just as a reminder. So when you look at the weighting of each quarter for us, about 20% of the RevPAR for the year is in the first quarter, you get about 60%-ish in Q2 and Q3 and then another sort of 20% in Q4. The fact that Q1 is — was softer and we’re seeing the trend turn is the reason why we feel pretty good about the cadence as you call it, going forward. And I mentioned the drivers that that we feel really good about with regard to employment numbers and wages and the like. When you look at projects that were on pause, if you will, during the Wyndham pursuit, there’s always opportunity out there for additional tuck-in acquisitions.
There’s opportunity for us to launch brands. And so some of those things, while we have the — in our long-range plan, we might have hit the pause button just as we were reflecting on how putting the two companies together would create a lot of value and maybe there’s no need to do a specific project. But there’s certainly a number of things that we have in the queue to continue to sort of grow our portfolio. As we’ve mentioned in past calls, we have some white space in our portfolio. I think the relaunch of Park Inn as that sort of gap filler between Quality Inn and Econo Lodge is a key aspect of that. We’re really excited about what we’re seeing in upscale. We had a really fantastic set of sessions with our upscale owners at convention last week and the growth we have in now eight brands that are in that segment for us, we feel really good about that.
And then the one that’s sort of lying in front of all of us is the international front. And there are a lot of what we do last week is meet with our international franchisees in Asia Pac, in the Americas and in EMEA. And there’s a lot of interest in growing with us with regard to our brands and other brands that might be available out there. So to your point, there are a lot of future growth opportunities, both organic and inorganic that will present themselves to us. And that as we have in the past, we’re going to continue to take advantage of.
Operator: Your next question comes from the line of Robin Farley from UBS.
Robin Farley: I wonder if you could tell us if you’re still expecting a full year increase in total units. I know the revenue-intense units, it sounds like your view on that is unchanged. Just wondering what’s happening outside of that segment? And then also, can you help us think about how to size the opportunity of the Park Inn by Radisson where you think that could go [indiscernible], on a full year basis in ’25. And you kind of alluded to — you referenced you potentially still looking at acquisitions, I think. So I wonder if you could just clarify that a little bit more. You kind of made the comment, I think, more having to do with your leverage levels. But if you could talk about what your latest thoughts are on that.
Patrick Pacious: Sure. So the first question with regard to total units, we do expect to grow total units. If you look, Robin, at the pipeline, we’re really excited by what we’re seeing. And I’ll just remind everybody what’s in that pipeline is worth double what’s in our existing system. So we talked about a 30% RevPAR premium, 40% more rooms and a higher effective royalty rate. It translates to what we’ve been saying on prior calls that what’s coming is worth double what’s leaving. So that pipeline of 115,000 rooms, that grew 10% quarter-over-quarter. It’s grown 20% year-over-year. And as Scott mentioned, our Q1 openings grew by 20%. So that more robust earnings potential per unit is starting to flow into the system. With regard to Park Inn by Radisson, if you look at that segment, there’s about 20,000 existing properties that are in the independent sector unbranded, which are ripe for conversion.
So the total available market there is significant. We mentioned that the enthusiasm at last week’s convention, the booth around Park Inn was full for the full three days that we were there. A lot of owners who are looking for that opportunity and looking for a fresh brand that’s connected to a robust delivery platform that we offer, we’re pretty excited about where that can go. But I wouldn’t try to put a number on it yet. I think we want to try to get some traction here first. And then just to clarify on acquisitions. As a company, if you look at our current portfolio today, probably half of the brands are ones we’ve grown ourselves, half are ones we’ve acquired over time. This is a scale business and finding the right acquisitions, be they transformational like Radisson or more tuck-in like WoodSpring, that’s something we’re going to continue to look at.
We don’t have anything that we’re pursuing today, but it is something that I think when you look out in the near term here, there’ll be more domestic opportunities, but also more international opportunities that come available. And just given the strength we have internally, to acquire brands, integrate them and grow them. It’s what we did with WoodSpring. It’s clearly what’s happening with Radisson and Country Inn & Suites. We feel really good about our internal capability and core competency to execute M&A really well and create a lot of shareholder value and value for our franchisees.
Operator: Your next question comes from the line of Joe Greff from JPMorgan.
Joseph Greff: A couple of quick questions here. Looking at your 2024 guidance, what’s embedded for royalty fee growth this year? Can that match the level of EBITDA growth? Or does it lag? And then I have a follow-up.
Scott Oaksmith: If you look at the building blocks of our royalty growth, so we’ve guided to our ring net unit growth of 2% and our RevPAR of 0% to 2%, so the midpoint of that being one. And then obviously, royalty rate in the mid-single digits. So that should be a good growth lever. But EBITDA should actually grow at a faster pace than that. Our EBITDA at the midpoint is between 9% and 10%. So with our ancillary revenues, cost control and other levers will actually grow our EBITDA faster than the royalty line item.
