And as a result, we do not believe that they are in conflict with or cannibalize anything else we’re doing, just because — I mean, I suggest anybody just go on the Web site, they got 500 plus, you can sort of get a feel for it. And I think we did huge amounts of work in terms of overlap analysis to make sure we understood that. I think you could very quickly understand that like this isn’t consistent with anything else we’re doing. It will be very — what we do in luxury lifestyle will be very different. What we’re already doing with LXR, our luxury soft brand is very different. Those hotels tend to be bigger, hotels, more meeting space and all of those things. So as I said, we’re excited. It’s very — as big as we are at 7,500 hotels across all of these chain scales, it’s really hard to find something that you would view as this complementary but we worked really hard to find that and we think SLH is that.
So we do not believe that — we believe it will bring in lots of new customers, serve our existing customers, as I said, really well, make them happier as they earn and particularly, they burn points and will not be in conflict either with our existing owners, but more importantly, not be in conflict with our existing growth opportunities and the brands that we already have on the brand park.
Richard Clarke: Maybe if I can just ask one very quick follow-up. Just the gap between the 15% RevPAR growth in owned and lease and the 8% revenue decline, what’s leading to that gap in that segment?
Kevin Jacobs: You’re talking about the — yes, it’s almost entirely the impact of government subsidies last year in the fourth quarter. I assume if you’re looking at year-over-year RevPAR relative to RevPAR growth, which is same store and the subsidies come in below the revenue line.
Operator: The next question is from Bill Crow with Raymond James.
Bill Crow: Chris, I’m curious, there’s quite a debate out there about inbound versus outbound, especially on the leisure side, you said you expect leisure to be up this year. I’m wondering what you’re seeing in your system tells you that outbound travel is going to be as strong as last year, or if we’re going to see more balanced playing field here in the United States?
Chris Nassetta: I think we’re going to see a very strong — a much stronger inbound year, that doesn’t mean outbound is going to be bad. But I think with what happened with the value of the dollar last year and you had the strength there, drove a lot of international travel, particularly to Europe, I don’t think — and people hadn’t been in a while, so you put those things together and it created a real groundswell for outbound business. I think there’ll be plenty of outbound. But I think the trend this year will be sort of recovering not maybe fully but getting much closer to full recovery by the end of the year on inbound international. The Chinese inbound is the big variable, which is still a small fraction of what it was.
I still think that takes a more protracted period of time, just given everything going on in China, but other countries around the world are compensating for that. So we might not get all the way back this year. I think TBD, but I do think for the story, part of the strength this year is going to be about inbound international. And I think part of that will obviously index very heavily towards the big urban markets. And that combined with what I already talked about on the group side, with the resurgence of all the big citywides and association as well as SMB group business that’s everywhere, but that’s nice for the big cities as well. So I think you’re going to see — I think that will — when we finish the year, we’re going to feel a lot better about inbound and not bad about outbound, but I think inbound will be the story.
Bill Crow: I do have a follow-up question, I’ll make it quick here. But you a couple of times have kind of emphasized this low supply growth environment. The development pipeline continues to build. It’s actually, I think, at all-time high levels. Your pipeline is a great example. I’m wondering if you’re seeing any change in the pace of new construction starts or any indication that the period between signed deals and groundbreaking is starting to shorten? It feels like we got kind of a coiled snake out there, at some point, we’re going to see some supply growth take off.
Chris Nassetta: I think you will. I mean, first of all, I mean, our numbers are really good and not to pat us on the back, but we take an unfair share of what is getting signed and an even less fair share of what’s getting financed. So our numbers are not indicative of what’s going on in the broader market. I think if you look in the broader market, the supply numbers are sort of circa 1%. And in my own view, you’re right. Eventually, that will go back up. I mean the 30 year average is 2.5%. So it suggests if you look at long-term trends, it will go up, particularly as strong as the business has been and we think will continue to be into this year. But there are natural limitations in place, which is why you see it at 1%. I mean the 1% is sort of an output of very high cost to build and higher cost of labor, and higher interest rates, no financing availability that occurred over the last couple of years.
And so you see that sort of hitting the numbers now. But the reality is while some of those things have stabilized, and that’s why our starts were up double digit in the US last year, it’s still very hard while financing. Interest rates have come down a little bit. Cost to build has not, but it’s stabilized. Obviously, rates have gone up. I mean the economic setup works pretty well, but it really works, it’s obviously really well for us because we drive very high market share and very high rates and higher than almost all of our competitors, so it works better for us. And the financing market, while it’s better, okay, that’s why we’re able to get — we got a lot more done last year, and I think we’ll get a lot more done this year. It’s not robust.
And so there’s a natural sort of gate that exist. And while it’s getting better, I think will exist for a while. And it takes time to build these things, right? So the reality is, I think, this year, we’ll still be not as constrained but more constrained financing environment that will weigh heavily to our benefit. And then I think it will continue to ease. But I think before you’re going to see a lot of this stuff convert for and mass from a pipeline to under construction, particularly here in the US, I think it takes a couple of years, and then it takes a year or two to build the stuff. So I feel pretty darn good about like ’24, ’25 and probably most of ’26 for being pretty meaningfully below the 30 year averages on supply, and that’s why I made the comments that I made.
I think it’s just math. At some point, they got to start to finish.
Operator: The next question comes from Kevin Kopelman with TD Cowen.
Kevin Kopelman: Could you give us an update on how you’re thinking about fee growth for the year? If you still expect it to exceed [indiscernible] plus RevPAR, and any kind of puts and takes there?
Kevin Jacobs: We still think — we think fee growth will be a little bit above algorithm as it normally is. A couple of headwinds, a little bit of headwind from FX, but even with that, we think we’ll be above algorithm for fee growth this year.
Kevin Kopelman: And then one other quick one. Could you talk about any plans or your plans to get back into the kind of 3 to 3.5 times leverage range that you talked about?
Kevin Jacobs: Our guidance this year implies we will be approaching the bottom end of that range. We still think it’s the appropriate range for us. Obviously, the borrowing environment has been a little bit challenged. We haven’t liked where rates have been. We’re still — obviously, our capital return is still moving up, and we’ve given guidance for this year. But the guidance for this year implies that we’ll be approaching the bottom end of that range by the end of the year.
Operator: Ladies and gentlemen, this concludes our question-and-answer session. I would now like to turn the call back to Chris Nassetta for any additional closing remarks.
Chris Nassetta: Thank you, everybody, again, for taking the time. Obviously, a really good year for us last year, some exciting things going on with SLH, but even the organic growth and increases in unit growth that we see, given the momentum we’re taking from last year into this year. We feel really good about the progress of the company. We feel really good about where things are and outlook for the full year. And we’ll look forward to catching up with you after the first quarter to give you an update. Thanks again, and have a great day.
Operator: The conference has now concluded. Thank you for your participation. You may now disconnect your lines.
