Chris Nassetta: Yes. We do get a bunch of questions periodically on like fees per room and they’re going up and going down. I mean that’s the reason we put it in there. And we’ll give you a lot more granularity on that on March 19 of next year when we do a full day or a good part of a day talking about it. But we just — we put it in there because we wanted to — we get the question enough. I wanted to publicly how we think about it. I mean, we described years ago when we had our last Analyst Day sort of an algorithm that had same-store growth, new unit growth with leverage associated with fee — license fee increases and that, that would ultimately give us same-store fee growth or fee growth that would be greater than the combination of those two.
And that is the condition that exists today. That’s what we see in the business today that as we model the business going forward, we believe that will continue as we look at the models. Why? Because of the things that are happy. We’re getting same store. We’re adding units, and we continue to see our license fee rates go up as we renew contracts. We have 5% of the system that’s sort of on average rolling out every year and getting mark-to-market. And we’re moving our — on a bunch of brands. We’re moving our license fees up. So when you factor for all of that, that’s how you get it on our — in our core RevPAR base. And then our non-RevPAR base fees as I think we’ve said a bunch of times, we’re having great success. There’s a bunch of different pieces of that.
The two biggest pieces of it are our credit card, co-brand business and our HGVC HCV business, both of which we think, over time, will grow at higher than algorithm on average. And so when you put all that together, those are our fees. And that’s why our fees, we believe, will be growing greater than sort of RevPAR plus NUG. And that obviously then translates if you just do simple math when you look at fees per room and you add RevPAR growth into that equation and you model it out over time, it’s sort of hard if you make those assumptions not to fees per room go up. So people ask us that. We think — I think the math is pretty easy. That’s why we put it in there is just to sort of marker out there. Again, we’ll give — we’re going to have — the reason we want to have an Analyst Day is to do a bunch of different things, but that will be one of them to give everybody a little bit more granularity.
But — and an abundance of sort of transparency, we obviously always have our business model and we think the math — the arithmetic is pretty straightforward and obviously compelling.
Operator: The next question comes from Stephen Grambling with Morgan Stanley. Please go ahead.
Stephen Grambling: Hey, thank you. I was going to touch on key money a little bit, which went up a bit guidance for the fourth quarter, even as conversions are also going up. Can you just remind us of your general approach to key money and how the industry dynamics around key money have been evolving as we think about not only in 4Q, but beyond?
Kevin Jacobs: Yes. So, Stephen, first of all, I’d say our overall approach to key money has been very consistent the entire time we’ve been here. We still have less than 10% of our deals that have any key money associated with them. I think you have to recognize that in a more competitive environment for conversions, those tend to be get a little bit more competitive and a little bit more expensive. But this year, what I would say is it’s just we happen to have one — we upped our guidance for overall CapEx, I should point out that, that’s not key money guidance. That’s overall CapEx guidance. We upped our guidance. We’ve been fortunate to win a few relatively large deals at the higher end of the business where they get a little bit more expensive in the fourth quarter.
And we had one big deal, as we’ve told you about that carried over. It really was a last year deal, but didn’t end up closing until this year, which caused last year to be lighter this year to be a little bit heavier. If you look at a three-year average we’re sort of south of $250 million of total CapEx, the way we guide it. And I think that’s the right way to think about it going forward. We think next year will normalize and be back into that sort of low 2s — low to mid-2s range on a total CapEx basis.
Operator: The next question is from David Katz with Jefferies. Please go ahead.
David Katz: Hi. Good morning, everyone. Thanks for taking my question.
Chris Nassetta: Good morning, David.
David Katz: You covered a lot of details and in particular, the NUG acceleration into next year. If you could help us unpack a little bit. Is there some expectation for improvement in the landscape? And I know Kevin mentioned taking share of the opportunities that are out there. How? Is that a function of key money? I’d love to just get a sense for how you’re pitching it and why you win?
Chris Nassetta: I would say, built in, I said this is a very granular for next year, it’s a very granular analysis. So it’s all in production or conversion. So I would say we do think — the environment is not great, but not bad. I mean things are getting financed. Actually, in a really tough environment, as Kevin implied, we end up taking share. So, we’re getting more — much more than our fair share of the development opportunities. Why? I mean, I’m obviously partial, but I think if you talk to a broad base of owners, I would say because our brands perform better. Our market share is the highest in the industry. And if they’re only going to do a few deals. They want to do them and get the highest returns, and so they go to the brands that are going to deliver their best performance.
So, I mean, it’s clearly it’s still a challenging financing environment, although open and slow. We haven’t made any big assumption to get to these NUG numbers for next year that something changes wildly. We think it’s sort of going to my guess is it will matriculate and get a little bit better because there’s a chance at some point next year, rates will come down things. So, we haven’t really made that assumption, as I said, because we — what’s going to happen next year is largely in production. But we do think as has been happening this year and for a number of years that we will continue to take share. And we do believe and built into this is that on conversions, again, I said I think we’ll be 30 this year. I think we’ll be about 30 next year too that we are going to get more than our fair share of conversions.
And we have enough momentum that I have the confidence to feel good about giving you the range and outcomes on that basis. And my guess is, as I said, if a few things go our way, we might be able to outperform that we’ve really definitely hit an inflection point of view. If you really think about the inflection point, it was sort of the second half of last year, you started to see the momentum shift and things bottom out in terms of signings and starts. And I kept saying this to people. I know everybody has been nervous, they’re not — for good reason. But you could — we can just see like the rack moving through the SNC [ph] so to speak, starting the second half of last year, and now you’re starting to see it produce. Third quarter is up a little.
You’ll see the fourth quarter, we’re going to have a very large delivery quarter. And our belief, just given, again, what we know is in production is you’ve hit a real point of inflection and you’re on the way back up. So that’s a lot to unpack. I think the core answer is there is no broad assumption of like the world improving from the standpoint of development and financing in any material way from where we are here.
Operator: The next question comes from Smedes Rose with Citi. Please go ahead.
