Kevin Jacobs: I mean over time, it will depend on market cycles, of course, but I think as we — particularly with Spark, which is 100% conversion brand, I think it will drift upwards over time and become an important part of — it’s always been an important part, but it will be a little bit higher over time. And then again, it will vary with market cycles over a longer period of time.
Operator: The next question is from Chad Beynon with Macquarie.
Chad Beynon: 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 [Star] results in each quarter. And for ’24, I think [Star] 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 [Star] 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?
Chris Nassetta: I mean, as you would guess, we look at what all the pundits have to say, including Smith Travel, and that’s interesting, but we do a ground-up process. I mean this is done by every individual hotel in the world, all 7,500 plus of them that then aggregates into us having a budget, and then we create a range around it. So that’s the process we go through. Obviously, there’s lots of uncertainty still on — as we’ve talked about, we sort of tend always to take the consensus view, which right now is a soft landing. So there are a lot of different paths that the broader economy can take. But it feels, certainly, with what we’re seeing in our business that, that is the most likely outcome. And so this is how we aggregated it together on a property-by-property basis.
I would like to believe, and certainly, every year, I believe that I’ve been here in 16 years, we have grown market share, including last year, where we grew market share pretty nicely, and we are currently at the highest levels of market share we’ve ever had in our history. If we do our job again this year, we will grow market share again, which should mean that we would outperform whatever the market gives us. That is what we are trying to do. In terms of internationally, I think I said it in my comments, international is going to be a bit above the US, in part because you still have parts of Asia. One, EMEA is really strong, just basically strong, it’s recovered and strong. And then you have parts of Asia Pacific that are still sort of recovering, notably the China market and the comparability benefits and that’s really causing a slight overperformance in international versus US.
Chad Beynon: Looking forward to more of that at the Investor Day.
Chris Nassetta: Look forward to seeing everybody.
Operator: The next question comes from Patrick Scholes with Truist Securities.
Patrick Scholes: 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?
Kevin Jacobs: 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.
Operator: The next question is from Duane Pfennigwerth with Evercore ISI.
Duane Pfennigwerth: 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?
Kevin Jacobs: Look, I think some of it is comps, right? Those segments recovered really well and a lot more quickly from COVID. So some of it’s year-over-year comps. So I think that you’ll always have those, as cycles play out, you’ll have those effects, and we really believe in the demand for mid scale. So you could have differences in year-over-year RevPAR growth relative to other chain scales. But in terms of serving tons of customers, we think there’s 70 million customers out there in that chain scale or below. And then if you think about — so for Spark, for mid scale transient, if you think about LivSmart for more extended sort of 30, 60, 90 day extended stay business, we feel really good about the demand profile over the long term and the ability to serve.
As Chris said earlier, in one of his answers, serve more customers, bring new customers into the system, but more importantly, deliver great returns for owners and earn more fees. We don’t do these things because of how year-over-year RevPAR growth will perform. Now like in these chain scales, we expect to generate premium market share and outperform the competition. But you’re going to to continue to have year-over-year in RevPAR growth, and that’s not why we do these things.
Operator: The next question comes from Michael Bellisario with Baird.
Michael Bellisario: 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?
Kevin Jacobs: So at the beginning, I’d say, look, for the first part of it, Michael, the success has been pretty broad based. I mean 45% up in signings which was up 31% in the US and then obviously a little bit better than that outside of the US and we expect another record year in 2024. And that’s just because our brands are performing, industry fundamentals remain good. So despite what people think about economic growth, you’re going to be in a supply constrained environment here for a while. And in those environments, we take more share, right? We mentioned we’ve got one in five rooms under construction more than any other hotel companies. So we have a lot of momentum and owners want to affiliate with us. And then when you get into an environment where capital — where lending is more constrained, right?
Lenders want to see — they want to lend to projects that are affiliated with our brands. And that’s not just a US phenomenon that’s around the world because lenders feel like they’re more likely to get paid back. And so a lot of it’s momentum, it’s across all the brands and chain scales and across all the regions. And then the second part of your question, I think — look, it is early days, it’s only a handful of hotels. But I think so far, what we’re seeing from the performance of the Sparks is in line market share premiums reasonable to strong loyalty contribution. We do think we’re going to sign up a lot more new members with these hotels, because we’ll bring new customers into the system. So it’s not just a matter of were they a member before they booked but sometimes they book and they become a member while they’re there.
So I think it is early days but pretty consistent performance across the board there.
Operator: The next question comes from Richard Clarke with Bernstein.
Richard Clarke: 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?
Chris Nassetta: The first on luxury lifestyle, no, this is not in lieu of that. We are still hard at work. I’ve made, I think, pretty clear for a long time, but much clearer lately that we intend this year to enter that space one way or another and we’re hard at work. And I think you should expect sometime this year, hopefully sooner than later to see us enter that space. And we think that’s something that is totally different than what we’re trying to do with SLH. In terms of the value proposition of existing brands versus SLH, as I said in my earlier comments, I mean SLH is something very different than LXR, very different than Canopy, different than Waldorf, different than Conrad, different than everything we have in the sense that these are really very small luxury hotels in very niche markets in a lot of cases, but even within non-niche markets, very niche locations.
