Smedes Rose: Hi. Thank you. I just wanted to go back to your comments around group business, which looks like it’s pacing very well up for next year. And you mentioned as you have before, that 85% is coming from smaller business enterprises. And I was just wondering if you could talk a little bit about the remaining 15%, which I guess is comprised of larger businesses? And maybe just what you’re hearing in terms of their sort of appetite to book into next year at this point?
Chris Nassetta: Yes. Thanks, Smedes for the question. I think you may be conflating two different comments. Group is way up 18%, group business on the books for next year. The 85%, I was talking about SMEs was business transient. It does turn out by coincidence that 85% of our group business is small and medium groups, but that’s a total coincidence. And 15% of it is sort of large, I’d say, 300-room plus groups. As we look at next — as you look at sort of implied, I think, in some of the comments I’ve already made or in the prepared comments, what’s going to happen next year is that it will start. I still think group business has always been dominated by just like business travel, business transient by small and medium groups.
But you will see the return of the mega groups that started in the second half of this year. It takes a long time to plan these things and think about it last year. Nobody wanted to commit them much because they didn’t know we were still in the open close, open close. They got to spend millions of dollars planning these events, they can’t get out of them, there’s penalties and everything else. So, people waited a long time, and then it takes — then they got to get a space and it’s getting much, much harder to get space for these city-wides and the big groups. So that just takes time. I think it will shift next year not radically, but I think you will see a decent shift to an orientation to the large groups because they have a huge amount of pent-up demand that needs to be satiated.
And so that’s going to start happening next year. My guess is you’ll see a big surge in it, it will shift the stats around. Over time, I think it’s probably like — I don’t have a hard data point, but sort of directionally having done this a long time. I think it’s like 80-20, something like that more normally. And so I think next year, you’re going to get — you’re going to get more of that instead of 85%, 15%, you’re going to see the bigger groups take a leap up in the short to intermediate term to get to a more normal environment. But we’re seeing sort of underneath the question, I assume, is what are we seeing in strength from small, medium, big, whatever. We’re seeing — if we sat in this very room with our sales team as we do every quarter and went through it all.
We’re seeing strength in everything. Group is just off the hook, strong tons of demand, peak groups or lead times are lengthening because the obvious, right? Now everything — there’s not been a lot of group hotels that have been built in this country for essentially 20 years. And so you have all this demand, you have fewer places to go. So, groups have to start planning further in advance and booking much, much further out. And so — the demand is very good. We’ve not seen — notwithstanding a lot of noise in the environment about like where is the economy going and the like for next year. It’s not — we’ve not seen any real impact in terms of group demand at this point to the contrary. Our teams are saying they’re doing everything they can to keep up with demand.
Operator: The next question comes from Brandt Montour with Barclays. Please go ahead.
Brandt Montour: Hey, good morning, everybody. Thanks for taking my question. Maybe for Kevin, the fourth quarter RevPAR guidance looks strong, not out of the arena of your third quarter RevPAR growth. And you don’t see that sort of translate into EBITDA year-over-year growth in the fourth quarter versus sort of the third quarter. Just wondering if there’s timing you want to highlight between the two quarters or anything else and why that would be a little bit diverging?
Kevin Jacobs: Yes, sure, happy to, Brandt. I think, yes, obviously, we raised our guidance about the amount of the third quarter. We did increase the top line for the fourth quarter a little bit, not huge, and it is flowing through, say, for there’s a little bit of timing in corporate expense, a little bit of FX and then a small amount for Israel. That’s really it.
Operator: The next question comes from Robin Farley with UBS. Please go ahead.
Robin Farley: Great. Thanks. I wanted to ask returning to the topic of unit growth. The conversion percent next year, you said about 30% as well in 2024. Can you give us a sense of sort of typically in October of the prior year, how much of those conversions would be kind of already on your books versus how much would come in sort of in the year — for the year you don’t have as much visibility on just kind of understand the visibility there? Thanks.
Chris Nassetta: It’s a great question, I wish I had a great answer. Every year sort of widely different I would say less than half, it’s not nothing, but a lot of the work gets done in the year. But I would say, if I had to guess that it half, maybe a bit less would be 40% to 50% would be on the books one way or another or maybe not in — it wouldn’t be in the pipeline, but it would be in some form of negotiation. I would say 40% to 50% would be in some form of negotiation.
Operator: The next question comes from Patrick Scholes with Truist Securities. Please go ahead.
Patrick Scholes: Hi. Good morning, everyone. The question about how you’re thinking about upcoming corporate rate negotiations for 2024? Thank you.
Chris Nassetta: Yes. We feel pretty good about it. I mean we’re in the — just getting into the thick of it. We’re never near done. Keeping in mind, it’s a relatively small part at this point of the business. This is like 6% of our business given that we have really pushed hard on the SME side of the business, and that’s 85% of the business. So when you whittle it down, it’s about 6% of the business. But we think at this point, when you add it all together, the fixed and the dynamic, most of our pricing is dynamic at this point. It’s probably in the upper single-digits.
Operator: The next question comes from Duane Pfennigwerth with Evercore ISI. Please go ahead.
Duane Pfennigwerth: Hey, thanks. Good morning. Chris, I’ll ask you to pull out your crystal ball for a second. Could you share some high-level thoughts on, which regions have the most RevPAR growth potential into 2024? Are you thinking maybe next year is more of a domestic growth driven year or more of the same with international leading? Does the regional leadership change into 2024?
Chris Nassetta: I think it will be — I mean, I think it will be reasonably balanced between the US and Rest of World, maybe a smidge lower in the US than Rest of World, but not too terribly different, at least based on what we’re seeing now. And then for Rest of World, I think we see positive growth everywhere, by the way. We don’t see a region where we will not have growth. We’re in the middle of budget season, so it’s slightly premature to judge exactly where it will be. But if you said to me, where do we think it would be recognizing we’re early in the process. I would say low to mid-single-digit global RevPAR growth. And we’ll, obviously, on the next call, we’ll give you a refined view when we have finished the whole process.
But again, I would think that would be Rest of World a little bit higher, US, not too terribly different, and the one that would lead the pack again would be Asia-Pacific for a bunch of reasons, most notably China, which, if you recall, just in terms of comps, China did open up and is now doing really well, but the first part of this year was not. So, you will have a very strong start given everything that’s happening in China in the business, which there’s a lot of noise about China in their economy. But from a travel tourism point of view, in China, it’s very, very strong now. We think that will carry into the beginning of the year, and then you’ll have some easy comps. So, we think from a pure what will RevPAR year-over-year growth point of view, where would the regions be, I would say, China and thus, APAC will lead the charge.
