Hilton Worldwide Holdings Inc (NYSE: HLT) Q1 2026 Earnings Call dated Apr. 28, 2026
Corporate Participants:
Charlie Ruehr — Vice President, Corporate Finance and Investor Relations
Christopher Nassetta — Chief Executive Officer
Kevin Jacobs — Executive Vice President and Chief Financial Officer
Analysts:
Shaun Kelley — Analyst
Daniel Politzer — Analyst
Stephen Grambling — Analyst
Elizabeth Dove — Analyst
Steven Pizzella — Analyst
David Katz — Analyst
Robin Farley — Analyst
Brandt Montour — Analyst
Trey Bowers — Analyst
Duane Pfennigwerth — Analyst
Presentation:
Operator
Good morning, and welcome to the Hilton First Quarter 2026 Earnings Conference Call. All participants will be in a listen-only mode. Should you need assistance, please press star then 0. After today’s prepared remarks, there will be a question-and-answer session. To ask a question, you may press star then 1. Please note this event is being recorded. I would now like to turn the conference over to Mr. Charlie Ruer, Vice President, Corporate Finance and Investor Relations. You may begin.
Charlie Ruehr — Vice President, Corporate Finance and Investor Relations
Thank you, Chuck. Welcome to Hilton’s First Quarter 2026 Earnings Call. Before we begin, we would like to remind you that our discussion this morning will include forward-looking statements. Actual results could differ materially from those indicated in the forward-looking statements, and forward-looking statements made today speak only to our expectations as of today. We undertake no obligation to financial measures discussed in today’s call in our earnings press release and on our website at ir.hilton.com. This morning, Chris Nassetta, our President and Chief Executive Officer, will provide an overview of the current operating environment and the company’s outlook. Kevin Jacobs, our Executive Vice President and Chief Financial Officer, will then review our first quarter results and discuss our expectations for the year. Following the remarks, we’ll be happy to take your questions. With that, I’m pleased to turn the call over to Chris.
Christopher Nassetta — Chief Executive Officer
Thanks, Charlie, and good morning, everyone. Uh, we certainly appreciate you joining us today. Before we begin, I’d like to acknowledge all those impacted by the Middle East conflict, and I’d like to thank our team members who adapted very quickly and continue to provide extraordinary hospitality during this difficult time. We remain hopeful for a swift resolution. Turning to results, we’re pleased to report a great first quarter during which strong RevPAR and net unit growth drove top and bottom line results above the high end of our guidance. Performance was driven by strengthening underlying demand trends along with ongoing system-wide share gains. Our industry-leading brands, strong commercial engines and powerful partnerships continue to differentiate us from the competition while a culture of innovation fuels additional growth opportunities. All of this, coupled with our asset-light, fee-based business model, positions us to continue producing significant free cash flow and driving meaningful shareholders — shareholder returns. In the quarter, we returned more than $860 million to shareholders, and we remain on track to return approximately $3.5 billion for the full year. For the first quarter, system-wide RevPAR increased 3.6% year-over-year, driven by broad growth across all all chain scales, brands, and segments, as well as sequential monthly improvement throughout the quarter in the U.S. In the quarter, business transient RevPAR was up 2.7%, representing a 4-point step up in demand from the fourth quarter when adjusting for day of week and holiday shifts, driven by improving midweek demand across all chain scales. Leisure transient RevPAR was up 3.5%, driven by concentrated spring break demand that enabled strong rate growth. Group RevPAR was up 4.3%, driven by growth in company meeting and convention demand. We continue to see healthy underlying momentum for group, supported by strong growth in corporate lead volumes. As we look ahead to the second quarter, we remain encouraged by a continuation of demand trends that we’ve been observing since late 2025 and now through April, but we do expect some head — headwinds related to the Middle East. For the full year, we expect improving performance in the lower and mid-chain scales, with REPAR strength continuing to move downstream from luxury and upper upscale toward a more balanced convergence demand shape, or what I have been calling a C-shaped economy. This trend should be most evident in the US, where supportive tax and regulatory policy, expected lower interest rates, increased private sector investment in AI and the AI complex, and ongoing public infrastructure spending are benefiting the middle and lower income — income consumer and driving broader demand growth. As a result, for the full year, our system-wide RevPAR growth expectations are now 2% to 3%, factoring in a range of scenarios for the Middle East conflict and recovery. For the year, we continue to expect group to lead, followed by business and leisure transient. Turning to development, during the first quarter, we opened 131 hotels totaling over 16,000 rooms. Representing our second strongest first quarter for hotel openings in our history. Our luxury and lifestyle brands continued to expand around the world, comprising 20% of total openings in the quarter. Earlier this month in Morocco, we proudly opened the Waldorf Astoria Rabat Saleh, kicking off 2026 with another key addition to the Waldorf Astoria portfolio, which now includes 40 trading hotels worldwide with more than 30 in the pipeline. Additional marquee Waldorf openings in 2026 will include the Waldorf Astoria Admiralty Arch in London and the Waldorf Astoria Kuala Lumpur in Malaysia. Within lifestyle, our Curio collection recently surpassed 200 trading hotels with notable openings in the quarter, including the newly built Monarch San Antonio and the converted Hotel Heron Alexandria, Old Town, Virginia. We also expanded our lifestyle footprint globally with the debut of Motto in Brazil. In Europe, this week, we will open a Home2 Suites in Dublin, Ireland, which marks the European debut of our Home2Suites brand, one of our strongest performing brands in the portfolio with more than 800 hotels open and over 750 in development. This positions this brand for extended rapid growth and allows us to capture even more demand from this important region. Conversions represented 36% of openings for the quarter across 10 brands in dozens of countries, ranging from flagship Hilton openings in Malaysia, Vietnam, and Thailand, to Spark openings in France, Canada, and the U.S. Following our Apartment Collection by Hilton brand announcement earlier this year, we now have our first 2 converted properties in Atlanta and Salt Lake City accepting bookings for this summer. Conversions overall are expected to be up on a nominal basis in 2026 across every region, demonstrating the performance our system delivers to owners. Despite the current macro uncertainty, signings and starts continue to have momentum. During the quarter, we announced multiple new signings across geographies, including 4 new brand signings in Turkey, 2 LXR signings in Japan, the debut of Motto in Australia and France, and the debut of Tapestry in Germany. In India, we signed a strategic agreement with Royal Orchid Hotels to open 125 Hampton hotels in the market, which puts us on track to exceed 400 hotels in the market in the coming years and reaffirms our commitment to expanding in this key emerging economy. We continue to build out our presence in the fast-growing and expansive region of APAC ex-China, where approvals, openings, and new development — development construction starts were all up double digits in the first quarter. Globally, we now expect new development construction starts to be up over 20% for the year, with the strongest growth in the U.S. and EMEA, signaling continued developer confidence and a strong desire to have hotels open in conjunction with a rebounding RevPAR environment. Our pipeline now stands at a record 527,000 rooms and includes brand debuts in more than 25 new countries, with Hilton representing only 5.5% of global hotel supply and over 20% of rooms under construction, we have tremendous opportunity to grow our market share from here. As we look ahead, we expect that our robust global pipeline, strength in conversions, construction start momentum, and industry-leading brand premiums will support, sustain, net unit growth of between 6 to 7% for the full year, even with the current geopolitical uncertainty. Innovation across our entire business is a core competency, and when deploying new technology, we’re focused on broad, impactful use cases to enhance the guest experience, deliver value to owners, and empower team members. As we advance our strategy, we’re leveraging AI to embrace the new ways customers are discovering and engaging with our brands, working with leading partners including Google, ChatGPT, and Anthropic, all while remaining focused on strengthening direct loyalty-driven relationships and maintaining discipline in how we manage distribution. Building on this, earlier this quarter, we deployed an Anthropic-powered platform for customers to dream and shop called the Hilton AI Planner. This LLM-powered tool combines our incredibly rich property content with vast information about local venues and activities to allow customers to search for and tailor an experience that is unique to their interests. The AI, the AI Planner enables guests to spend more time dreaming within our native environment, which should drive incremental demand across our portfolio as customers book with us more often and more quickly. We’re just getting started on how technology can customize the customer experience. And the Hilton AI Planner is one great example of how we’re delivering our signature Hilton hospitality and enhancing the dream shop, book, and stay guest journey. During the quarter, we were proud to once again be recognized as the top-rated hospitality company by — on the Fortune and Great Place to Work list of the 100 best companies to work for in the United States, marking our 11th consecutive year earning this distinction. We also continue to be recognized for our world-class culture globally, receiving Great Place to Work honors in 17 countries including 7 number 1 rankings. Overall, we are very encouraged by the strength of the demand environment across all our brands. We remain confident that our powerful network effect, industry-leading RevPAR premiums, and fee-based, capital-light business model will continue to drive strong operating performance, net unit growth, and meaningful cash flow, enabling us to return an increasing amount of capital to shareholders. Now I’ll turn the call over to Kevin to give you a few more details on the quarter and expectations for the full year.
Kevin Jacobs — Executive Vice President and Chief Financial Officer
Thanks, Chris, and good morning, everyone. During the quarter, system-wide RevPAR increased 3.6% versus the prior year on a comparable and currency-neutral basis. Growth was driven by broad growth across all chain scales, brands, and segments, as well as sequential improvement throughout the quarter in the U.S. Adjusted EBITDA was $901 million in the first quarter, up 13% year over year and exceeding the high end of our guidance range. Outperformance was predominantly driven by better than expected system-wide RevPAR growth. Management franchise fees grew 10.4% year over year. For the quarter, diluted earnings per share adjusted for special items was $2.01.
Turning to our regional performance, first quarter comparable U.S. RevPAR increased 3.4%. Driven by group growth trends continuing from the prior quarter, broad business travel strength, and leisure demand from a concentrated spring break. For full year 2026, we expect U.S. RevPAR growth to be at the high end or above system-wide guidance. The Americas outside the U.S., first quarter RevPAR increased 4.4% year over year, driven by strong demand across all segments and continued strength across the Caribbean and South America. For full year 2026, we expect RevPAR growth to be in the low to mid-single digits. Europe RevPAR grew 6.9% year over year, led by growth across all segments. Continental Europe strength related to the Winter Olympics and other regional event-driven demand. For full year 2026, we expect RevPAR growth to be in the low to mid-single digits. In the Middle East and Africa region, RevPAR decreased 1.7% year over year, as strong early quarter performance was offset by weakness following travel disruptions from the conflict across the Middle East. For full year 2026, we expect RevPAR to be down in the mid to high teens as a result of the ongoing conflict in the region, and we expect the biggest impact to be on second quarter performance. The Asia Pacific region first quarter RevPAR was up 9.1% in APAC ex-China, led by Australasia RevPAR growth, and extended Chinese New Year and other regional events. RevPAR in China increased 1.3% in the quarter, driven by business segment recovery but offset by continued pressure in group from softer convention and company meetings activity and leisure due to weaker inbound travel. For full year 2026, we expect RevPAR growth in Asia Pacific to be low single digits with RevPAR flat in China. Turning to development, as Chris mentioned, for the quarter, we grew net units 6.3% and now have more than 527,000 rooms in our pipeline. We continue to have more rooms under construction than any other hotel company with approximately 1 in every 5 hotel rooms under construction globally slated to join the Hilton portfolio. We expect to deliver between 6% to 7% net unit growth for the full year. Moving to guidance for the second quarter, including the impact from the Middle East conflict, we expect system-wide RevPAR growth to be between 2% and We expect adjusted EBITDA to be between $1.015 billion and $1.035 billion and diluted EPS adjusted for special items to be between $2.18 and $2.24, both impacted by the significant Middle East RevPAR decline and several one-time and timing items that are unique to the second quarter year-over-year comparison. For the full year, we expect RevPAR growth of 2% to 3% driven by strengthening underlying fundamentals across chain scales and segments and factoring for a range of scenarios for the Middle East. As a result, we expect adjusted EBITDA of between $4.020 billion and $4.060 billion and diluted EPS adjusted for special items of between $8.79 and $8.91. Please note that our guidance ranges do not incorporate future share repurchases. Repurchases. Moving on to capital return, we paid a cash dividend of $0.15 per share during the first quarter for a total of $35 million. Our board also authorized a quarterly dividend of $0.15 per share for the second quarter. For 2026, we expect to return approximately $3.5 billion to shareholders in the form of buybacks and dividends. Further details on our first quarter results can be found in the earnings release we issued earlier this morning. This completes our prepared remarks. We would now like to open the line for any questions you may have. We would like to speak with as many of you as possible, so we ask that you limit yourself to one question. Chuck, can we have our first question, please?
Questions and Answers:
Operator
Thank you. Our first question will come from Sean Kelly with Bank of America. Please go ahead.
Shaun Kelley
Hi, good morning, everyone. Thank you for taking my question. Chris, obviously a big notable change in the U.S. demand dynamic, so hoping you could just unpack that a little bit for us. That gets us to probably nearly a 200 basis point increase in your outlook from where you were at the beginning of the year. So could you just walk us through that and maybe elaborate a little bit on your comment around the C-shaped economy? Are you actually seeing some evidence of that convergence as we get here into April? Or what gives you that confidence to kind of make that statement? What are you seeing that’s getting you excited about the business? Thanks.
Christopher Nassetta
Thanks, Sean. I think that’s a great way to start. With the Q&A because it’s the biggest question out there. I think if you go back, I can have the team fact-check me, but if you go back to like mid-year last year, I was very much of the mind that I saw, if you lift it up above a lot of noise, that there were some really good fundamental things happening from a macro point of view in the U.S. economy that to my mind, sort of had to eventually translate into higher growth rates. Now, I will admit that certainly in the third quarter, you know, as we reported, while I said that, I also said we’re not seeing the green shoots or, you know, a whole lot of evidence of that yet. But I, you know, but then again, if nothing, I’ve been consistent. You know, in the fourth quarter, I repeated my view that we were, you know, that we had to start to see what I sort of made up on my own, instead of a K, a C economy where you see convergence of the lower end, you know, the middle class, mid-price segments in our industry moving up. And in the fourth quarter, we started to see a little bit of evidence of that. Now I would say as we’re in the first quarter and looking into Q2 where we have, you know, part of the quarter behind us, Obviously, in the sense of April, we have very good sight lines into May. You know, we’re seeing it, right? We’re seeing what, to me, was inevitably on its way, but, you know, it takes time for these things to sort of seep into the economy. So, you know, I said it in my prepared comments, and at the risk of, you know, taking too much time here, but I do think it’s the most important question and answer. You know, what’s driving it? Well, I think what’s driving it is, you know, these — a number of very big picture things that are going on. One, forget for the moment the spike in, you know, energy prices and oil because of the war in Iran. I mean, broadly, structurally, particularly in housing, you have inflation coming down. And as a result, broadly, again, not, you know, in this exact moment, broadly rates have come down. And I think they’re — You know, the next — you can debate how fast, when, second half of this year, first half of next year. But I think there’s a broad understanding that particularly if we get the Middle East stuff sort of settled down, you’re going to be in a, you know, a lower inflationary environment and it will allow the Fed to continue to bring rates down to stimulate the real — the real economy, which is what they’re trying to do. You’re in obviously one of the most deregulatory environments in what I can remember in modern history, and that means financial services, energy, you know, you name it across the spectrum, you know, that you have a broad deregulatory regime. And that, you know, in addition to that, the backdrop, you know, because of the bill that was passed last year, you are in a multi-year position where you have very, very business-friendly tax attributes, right? And I thought, you know, that’s, you know, very hard to get done. You know, it’s certainly not going to get undone during this administration. And let’s be honest, when you look at it historically, it takes a lot even with change of administration to get that kind of sweeping tax policy change. So I think you have a number of — of years and running room and favorable tax policy. And then like, I’ll state the obvious, you have a lot of investing going on in America. Where is that investing? Obviously AI, all the AI companies, the whole AI complex around it, data centers, energy. It’s like the great race. People are spending money like crazy in and around that. You have infrastructure, which I’ve talked about for a number of quarters. Biden era infrastructure bill, $1.6 trillion, very little of which percentage-wise has been spent. The CHIPS Act to reshore, you know, critical manufacturing, again, $800 billion, very little of that is spent. Why? Because it takes time to get these things like land permits built. So these things, you know, these things, you know, they take a number of years to sort of seep into the system. But I think you’re starting, you’re starting to see it. The best evidence of that, if you, you know, if you go back and there’s, The correlation sort of got obtuse or broken apart during COVID like a lot of things. But, you know, over long spans of time, the highest correlation, 95% plus, over a very long span of time, the correlation and demand growth for hotel rooms has been growth in NRFI, non-residential fixed investment. Sort of like we’ve lived in Crazyville post-COVID where you have all this swirling stuff going on, hard to understand. But To me, you know, over the long term, that is exactly what is going to drive the business. And that’s exactly what’s going to drive the mid-market of the business, all that investing in non-residential fixed investment that takes the middle class getting in the game. And if you look at those numbers, they’ve been moving up and they’re, you know, perennially bad at forecasting NRFI from my experience, but the actual numbers being reported are moving up, and my guess is the next several years they’re going to keep moving up. And as they do, you’re going to see this convergence. With all of those things going on, you’re going to see this convergence. By the way, if that’s not enough, I mean, I know it’s a whole different topic of displacement and everything that goes with AI, but AI is also going to provide one of the greatest productivity booms. I mean, it’s going to be equal to or bigger than the internet productivity boom. Yes, there are people, there’s winners, there’s losers, there’s need to retrain and shift and reskill people. All of that stuff we won’t get into today with the limits of time. But there is no world where economically it’s not advantageous to have productivity gains. Like there is no world, there is no time in American history where big productivity gains weren’t matched with big economic growth. So I sort of put all that together and I, you know, I feel like, okay, it’s happening. Like, I want it to keep happening.
We don’t — you know, I want to be, you know, thoughtful about — like, we’re talking about, you know, a little bit of fourth quarter and the first quarter, and now looking into the second quarter. And I don’t want to overcook it, but, um, I — you know, all those things I’ve been thinking, I think are happening, and I think it’s now showing up in our business, uh, and it makes it makes me feel good that we, you know, that we could be in a timeframe, honestly, where, you know, like, I love it when we’re sitting around at this very table every week talking about performance, and every time we talk, it’s getting better, right? And that’s what’s been happening for a while, you know, for weeks and weeks, it’s getting better, you know, like, so I, you know, and as we look further out in the year with the visibility we have, you know, And here in the U.S., it feels better. So, you know, reality is, you know, we gave guidance to the Middle East. I’ll leave that to somebody else to ask. Creates some uncertainty, but, you know, I think you could make an argument that we are being reasonably conservative with our full-year guidance.
Shaun Kelley
Thank you so much.
Operator
The next question will come from Dan Pulitzer with JPMorgan. Please go ahead.
Daniel Politzer
Hey, good morning everyone. Thanks for the question. I suppose I’ll take the bait on the Middle East there. Can you just remind us what the exposure in terms of EBITDA or fees across your businesses there? And I guess, how do you think about the Middle East dynamic and disruption there flowing through to the other regions of your business, you know, throughout the course of the year and, you know, impacts the U.S. outbound travel?
Christopher Nassetta
Sure. Middle East is about 3% of the business. So you’d say, all right, well, it’s not that big a part of the business. You know, like Q2, you see that, you know, it’s impacted by a few things, some one-time stuff that Kevin mentioned from last year, but it’s also impacted by the Middle East. I mean, the Middle East, you know, for Q2, which is when we think it’ll probably be, you know, most dramatically impacted, you know, if it’s 3%, it could be down 50% or something like that. You know, you guys could do the math. That could be 1.5 points on system-wide. So whatever guidance we gave you, if the Middle East were doing what it normally does, it wouldn’t be, you know, which had been running in the high single digits, low double digits now, you know, for a quarter minus 50, you know, you flip that around and in Q2 you would be above where you were in Q1. So even though it is a small percentage of 3, when you get in, very large numbers, small percentage of a large number becomes a decent-sized number. Having said that, we are already — I mean, I don’t know where this is all going to play out. I’m looking down at my window to Washington. We’ll see. I don’t know. I suspect there will be an off-ramp eventually, just given a lot of things, politically and otherwise, in the not-too-distant future. Things have already settled down a bit. I mean, we are already starting to see again in my weekly around this table when I’m getting reports, you know, certain markets, you know, within the Middle East that are some of our bigger markets are starting to sort of stabilize and move up. I mean, there’s — they’re still quite impacted, but they’re getting better. And so what we tried to do in our guidance was again, on the margin, be a bit conservative and thinking about a range, like in the first quarter, we think it was probably 30 or 40 bps, something like that. And in Q2, I just gave you the metric, it’s probably a point and a half. For the full year, you know, it’s probably half a point to a point impact depending on what you think the trajectory will be. And it, you know, at the lower end of that range and thus at the lower end of our overall guidance range, I think, you know, what we’ve assumed is it stays pretty bad, you know, and that there is in fact some knock-on impact to your question. There’s some knock-on impact on other markets. We’ve seen a little bit of that, you know, a little bit in India, particularly Bangalore, a little bit in the Seychelles and Maldives because of transit through Dubai, but not a lot of knock-on impact. But we’ve assumed if it stays really bad, there’ll be a little bit more. And then obviously on the, on the upside that, you know, you continue to — things stabilize and you continue to have recovery, but not, you know, not necessarily a super V-shaped recovery, just sort of grinding, grinding back up through the rest of the year. So again, my experience I’m sad to say I’ve been doing this long enough. I’ve had to live through stuff like wars and pandemics and like whatever else, you know, it feels like. And so, you know, I feel like in this moment, you know, we’re trying to be responsible with you all and telling you, we’re giving you a range of outcomes that, you know, that we think, you know, are rational. And if anything, probably on the conservative side as they should be in terms of, I mentioned it on the development side, only about 2% of our deliveries for the year are coming out of the Middle East. But those are important deliveries. We do think things will slow down a little bit there. It’s so early in the year, we don’t know. And so again, that’s why we — I think but for that, we probably would have been telling you we’re in the upper half of our 6 to 7 range. But because of the Middle East and potential for supply chain knock-on in other parts of the world, we feel like, you know, keeping the range where it was was more appropriate. Again, I mean, you could say we’re being too conservative or whatever, but I mean, you know, war is war. There’s a lot, you know, a lot of possible outcomes. We’ve tried to frame it around those and be thoughtful about it.
Daniel Politzer
Got it. Thanks so much for all the detail.
Christopher Nassetta
Yep.
Operator
The next question will come from Steven Gramblin with Morgan Stanley. Please go ahead.
Stephen Grambling
Thanks. Appreciate all the color on the macro. As we look at some of the actions outside of RevPAR, particularly the launch of the select brands, can you elaborate on how this compares to a typical brand agreement and what are some of the guardrails for what brands you’d be willing to include going forward? And if I can just sneak one more that’s related on, does this launch change the way you think about either the marketing or system funds allocations or even M&A?
Christopher Nassetta
No, no to the last part of that. Let me, let, but so I’ll answer that. That doesn’t change any of that. I mean, the way to think about Select is like anything we bring into the system, the first step is quality, does it add to our network effect, is it a swim lane or, you know, a brand that we think our customers want that has the quality that we have promised to give our customers and that we think it will create a benefit, a strengthening to our network effect. That’s always the first filter. So we — if it doesn’t meet the criteria of like, we already have something on top of it or we’re, you know, or we don’t like the quality, we’re not doing it. And by the way, we’ve had dozens of opportunities in select that you don’t know about because we haven’t done them. This is — we’ve done one. I suspect there will be others. I, you know, I don’t know how many there’ll be because we’re super stringent on what we would do. And so the way to think about it, and Yotel is a great example, it’s like, It’s a great smaller brand. They’ve struggled to really, you know, customers love it. The quality is good and they have a real following, but they’ve had a real, you know, problem without having global scale and all the network effect that we have and the ability to invest in technology and all those things at the level we do to sort of make it work the way they want it to work. And so, You know, that was a unique opportunity for us to say we love it, our customers, we did a lot of work, we think our customers like it, it resonates well, the quality is good, and importantly, we’re entering into agreement that is consistent with the way we would approach, you know, any franchise agreement. This is a franchise relationship with them. We are getting, you know, and if you look at the — I know there’s been a lot of noise out there, but if you, you know, there’s a ramp involved like a lot of our larger, you know, multi-unit franchise deals. But if you look at a run rate basis, this is very consistent in how we charge for license fees, system fees, all of that. And it is on a fee-per-room basis, very consistent with a product with, you know, at, at, at, in that category. And so the, the difference is it’s just a little unique brand. And so like, could we, you know, could you do it somewhere else? Yeah, you could say like, what’s the difference between that and like doing it, you know, as a TAP or whatever? Well, Yotel is a good example. It’s unique. It doesn’t fit in TAP or Curio. It’s its own thing. And so we didn’t want to try and like, we want to have, you know, we don’t want to have cognitive dissonance with our customers as we bring things in the system. And we liked the brand. We wanted it to stand on its own, but we, you know, we want to do it the right way. We want to get paid for the effort. And we want to, you know, want it to be something our customers really think enhances the broader system. And so there’ll be others, I’m sure. We’re working on a bunch of others. But I said, like, turndown ratio is very, very high. Obviously, the appetite for folks to, you know, that have small brands, I think is quite high, you know, in an environment where we have this much scale and the ability to how we work with all the intermediaries, the dollars we can invest in our commercial engines and technology. It’s a — I think we have a real competitive advantage. That’s why the average market share of our brands is so high and much higher than our competitors. And so increasingly, little microbrands around the world, I think, not all of them, but some are figuring that out. And we’ve been talking to a bunch of them. So I suspect Some others, you know, some others will come into the fold over time, but we’ll be hyper-disciplined about it. Again, quality, you know, the brand works, fits in our ecosystem, and we get — the fees per room are good, and we get paid for the effort.
Stephen Grambling
Thanks. Appreciate all the detail.
Operator
The next question will come from Lizzie Dove with Goldman Sachs. Please go ahead.
Elizabeth Dove
Hi, good morning. Thanks for taking the question. I wanted to go back to the AI and kind of technology side of things. Obviously, things are moving very, very quickly. You mentioned you launched the Hilton AI Planner, but I guess just now, you know, another quarter into things, how do you think about what the kind of real opportunity set here is long term? You know, both obviously on the OpEx side of things internally, but then as you think kind of bigger picture externally from, you know, the distribution side of things also.
Christopher Nassetta
Yeah. I mean, we talked about this, I think, at fairly good length on the last call, and it’s obviously an important question. And given the amount of time we’re spending on it and everybody is, it would be fair to say it’s worth addressing. I would say, you know, you’re right. There’s a lot of effort going into it by everybody, certainly by us. Things are moving very quickly. I would say as every day goes by, we’re learning and iterating and thinking and doing different things and working with different partners in different ways. And I think the opportunity gets more, not less interesting. You know, I know that’s what you’d expect me to say, but I believe it to be true. I think, you know, the 3 buckets of how we think about it haven’t really changed. I think we think about this as a — you know, a means to create, you know, to use our scale as a weapon in creating efficiency, which we think can translate into being more efficient at how we go to market and how we deliver for our owner community and more effective. And, you know, yes, that could benefit our P&L too, but really the largest part of our system costs really relate to the part of the system we manage on behalf of owners. Every time we can create — we can be more effective, more efficient in that world, it can translate into benefits for our owner community who need it and want it and deserve it. You know, our Project Rise, you know, this year was in part enabled by work that we’re doing in this bucket, if you will. And so I’d say we’re early days, and I think you have huge opportunities to think about systems and processes across what is a very big global company to continue to garner efficiencies, but most importantly, to be much more effective, be able to move quicker, you know, add hotels, ramp them quicker, just because, you know, we take great systems but antiquated systems and we, you know, we hypermodernize those. In the second bucket, you heard me mention we’re working with a bunch of the folks out there, Jim and I, OpenAI, you know, we’re gonna be opening our app within their environment the next couple weeks. Talked about our AI planner in our environment that we did with Anthropic and Claude. We’re working with everybody and, you know, while it’s moving fast, you know, there’s a long way to go. And so I do, you know, increasingly feel really good about what the opportunities for us are. I mean, if you think about it at a, at a high level, If you look at the quality — look, using the U.S. market as an example — if you look at the quality hotel market in the United States, we’re over 25% of the market. I think that puts us in a — and we are the only ones with that 25% of the market that control rate, inventory availability, period, end of story. Nobody can get it unless we give it to them. You know, in a world where you have a, you know, a more competitive environment, There are a bunch of debates, who’s going to win, who’s going to lose. That’s not for us to judge. I think there are probably going to be more — there’s going to be more than one winner. That’s why we’re working with everybody. But we realize the asset we have in the system and the control of the system and given our scale is really valuable that effectively people really do need us if you’re going to have, you know, you can’t be missing 25 or 30% of the quality inventory in the US and have something that’s a real full offering. And so, you know, I like where we sit. It’s complicated, it’s fast moving, there’s risks, but we’re approaching it, you know, very much in the form of a partnership with all of the counterparties that are developing these technologies. We wanna show up with all of them. And in the end, I do believe as a result of the great work they’re doing and a result of discipline on our side, that there’s real opportunities to create more efficient, more effective distribution. There just, there sort of just has to be if we’re smart about it and we intend to be. And then the last bucket, AI Planner is in fact part of it. And you think about when we have a stay experience, people are with us, your customers, we have all sorts of opportunities to like equip our team members now with all the information we have with technology in the palm of their hands to deal with problems, to customize the experience. And we’re testing and learning in the stay experience with really cool things that really revolutionize the stay. But we also, you know, a lot of the engagement we have is with our customers is digital. Think about when they’re dreaming, booking, planning, post-day, and so — and they’re not with us. And so, you know, that’s about trying to make sure that the approach we have digitally with folks is utilizing all the best thinking and technology to create a very engaging experience so that yes, when they’re with us, they have the best day experience in the business, and that’s why they want to come back. But when they’re not with us in these other steps of the customer journey, they feel equally good about our ability to give, to satisfy their needs and to customize at mass scale. And so again, all this stuff, I mean, we’re doing things, we talked about it, you can go play with the AI, the Hilton AI planner, stay planner, you know, it’s early days, but we’re doing, super important foundational work. And the last thing I’d say is, you know, our tech stack, and it’s not by happenstance, you know, is very advanced. So many years ago, COVID like turned into a time warp, but pre-COVID, so probably 8 or 9 years ago, we made the decision to really completely blow up all of our legacy architecture and make sure that our core systems and otherwise were, you know, cloud-based, open source, microservices, services driven, which means a totally modern tech stack that has like incredible agility and agility, you know, and the ability to have control. So it’s a system built on, you know, on certain elements of table stakes sort of technology. It might build off an existing platform, but where we customize and modify it, you know, it’s things we own and control. And so it gives us, we think, a really unique ability to be agile and do things for customers that are going to be unique that others, you know, that are going to be with monolithic providers can’t do. And so that was a very purposeful decision to my tech team. They’re extraordinary in leading that effort over a bunch of years. And I would say it just puts us in a really good position in the world we live in where AI is coming and you have all this opportunity, but if you don’t have the flexibility and agility on a tech stack, it doesn’t really matter because, you know, it’s sort of like the machine stops. So I’ll leave it at that. We could talk AI all day, but we’re — and we do around here talk about it a heck of a lot, but that’s probably enough for today.
Elizabeth Dove
Thank you.
Operator
The next question will come from Steve Polizza with Deutsche Bank. Please go ahead.
Steven Pizzella
Hey, good morning and thank you for taking our question. Just wanted to follow up on the expectation for conversions to be up in 2026 across every region.
Do you think this is a new normal for conversions moving forward or will we revert back to a more normalized conversion level versus new construction mix? And is there anything to think about from a fee perspective longer term if conversions continue to be a greater portion of the fee mix moving forward?
Christopher Nassetta
I don’t think there’s any material impact on the fee side of it. So answering that first, I would — you know, this year we’re going to tick up. As I said, last year we were like 36%. Current forecasts are we’re trending a bit above that, probably 38% to 40% in the latest numbers. I mean, there’s a lot of moving parts in the year for the year, but we think it’s going to be up. Modestly. I actually, you know, I think the math of it is such that on an absolute basis, I don’t think you’re going to see a big drop-off in conversions. As a percentage of NUG, I do think you will see it moderate over time, but that’s because you’ve been in a world where construction starts, you know, haven’t really gotten back to pre-COVID levels, and that will happen and is happening. It probably happens this year. And as you start to have that happen over the next 2 or 3 years and new construction, you know, grows in an absolute sense, I think, I think the percentage will decline. I don’t think it’ll ever go back down. I mean, we peaked during the Great Recession in the low 40s. We’re sort of back there now. Went as low as the high teens. I don’t think we’re going to be in a world where it’s high teens. I mean, when it was in the high teens, let’s be honest, we had one brand, one and a half brands sort of, like Hilton and DoubleTree when it went that. Now, we’ve got, you know, a dozen brands that are really — a dozen or more brands that are really good candidates for conversions. And so, I think you’re probably sort of permanently in the 30% to 40% range. I’m making that up, but I mean, directionally, if you did the math on new starts, I think you’re sort of permanently in that range.
Operator
The next question will come from David Katz with Jefferies. Please go ahead.
David Katz
Hi, good morning, and thanks for taking my question. I know you said you’d like to sort of leave the AI discussion right where it is. But I wanted to ask something just a little more industry level, if that’s okay. Which is, it’s obvious that you’re making great progress and working at terrific speed. Outside the industry, not talking about competitors or peers, right? There’s sort of an independent track that’s going on and there’s also an OTA environment that’s also, I assume, you know, moving as fast as they can. How do you envision those dynamics sort of playing out, and do we evolve into kind of a different industry landscape in that regard? Or, you know, are you just running your race and largely, you know, not paying a ton of attention to what they’re doing?
Christopher Nassetta
Oh no, we of course are paying a lot of attention to what everybody’s doing. I do think on the margin, it’ll look a lot like it does, you know, over the next 5 years from now, it’ll look like a lot like it does today or it has looked. I think on the margin though, if we do our job, I think AI allows us, as I said, to be more efficient and more effective. We did that is, Code for continuing to build more direct lines to our customers. I mean, that’s where we have a terrific relationship with the OTAs and we do a certain segment of our business with them. And I suspect we will for a very, very long time. But I think our ability, you know, our control over our inventory, our ability to customize the experience in unique ways, it being a more competitive environment. Where there isn’t just one winner in search probably when it’s all said and done. I think that puts us in a position where we can — it gives us an advantage relative to what we’ve had to continuing to build more direct business. Now, 80% plus of our business is already direct, so we’ve had a fair amount of success in doing that. But I think on the margin, it helps in that regard. But I go back to where I started. I don’t see that the whole system changes in a material way anytime soon.
David Katz
Okay, that’ll do. Thank you very much.
Operator
The next question will come from Robin Farley with UBS. Please go ahead.
Robin Farley
Great, thank you. My question is not about AI. Just looking at results, you know, fantastic results, and I think that Full year RevPAR raise higher than the market was expecting. I am curious, you know, last quarter you had a slide that showed that 100 basis point raise in RevPAR would be 100 basis point raise in EBITDA, and it looks like it’s maybe sort of more like a 50 basis points raise in EBITDA. Your G&A didn’t change. Just anything else you would call out in that sort of flow-through to EBITDA from the raise? Thank you.
Kevin Jacobs
No, Robin. I think — look, I think the rule of thumb we would use and, you know, maybe the 100 basis points was a little bit of rounding and I think we’ve actually updated that more recently. The rule of thumb we use is about $25 million or $30 million of EBITDA per point. And so we raised our guidance, our FFR guidance by 1 full point. So if you think about that as being typically $25 million to $30 million, the things that are going on there is you just have the impact to in the Middle East with a little bit of IMF and a little bit of FX, which caused us to raise the midpoint by 20 instead of call it 25 at the low end of the range. So that’s the way to think about it, and it’s not more complicated than that.
Robin Farley
Okay. Great. Thank you.
Kevin Jacobs
Sure.
Operator
The next question will come from Brant Montour with Barclays. Please go ahead.
Brandt Montour
Good morning, everybody. Thanks for taking my question. So back to demand, you sounded really good on group business. That was that was sort of the downside surprise for the industry last year, obviously, with tariffs. And just sort of curious, you know, when you think — when you look out and expect group still to lead, are you actually seeing in the year for the year group bookings materialize better than plan? Or is it really just sort of easy comps that give you that confidence?
Christopher Nassetta
No. I mean, we’re seeing real lead volumes and bookings in line with the forecasting we have. And atmospherically, in the discussions that our sales folks are having, you know, broadly about sentiment in that space and the corporate space for that matter, are much better, quite good. So I think it, you know, I think, listen, people are feeling better when they’re spending more. They need to move more. They need to aggregate people more. And we’re seeing it show up. So booking — the booking position supports it. The leads more than support it.
Brandt Montour
Thanks, everyone.
Operator
The next question will come from Trey Bowers with Wells Fargo. Please go ahead.
Trey Bowers
Hey, guys. Thanks for the question. Just getting back to NUG, to the extent that the disruption in the Middle East might cause some impact on 6% to 7% growth this year, Is that just some of the either conversions or new builds kind of fall out of the system or the expectation if you were not at the high end of that range for this year, would most of that just fall into 2027?
Christopher Nassetta
It’s just timing. It’s just timing. We don’t — we’re not concerned that anything’s falling out of the pipeline or, you know, conversion opportunities are drying up. It’s just like there’s a lot going on over there and Some people have slowed construction. They’ve slowed decision-making on conversion deals that they were working on. So, I don’t think we feel like any of it really ultimately falls away. I think it’s just a question of when it gets done. And it’s early to say. By the way, my, you know, my team says it’s, you know, our team says it’s picking up, you know, by the day. You know, like Saudi Arabia, you know, sort of isn’t missing a beat. UAE, a little bit more disrupted. You know, Kuwait, Qatar, much more so because the issues there have been more dramatic. So really, it’s not like one, you know, monolithic area. It’s country by country. And so, yeah, we’re watching it carefully. But I don’t — I think it’s — I don’t think these are things that like disappear. I think it’s just a function of, you know, it may push a quarter or two.
Trey Bowers
Got it. Thanks.
Operator
The next question will come from Duane Finningworth with Evercore ISI. Please go ahead.
Duane Pfennigwerth
Hey, thanks. Just to stick on that theme, as you think about your share of rooms versus much larger share of rooms under construction, what markets do you feel like that disconnect opportunity is biggest? Basically, what geographies offer the best share gain opportunities you look out maybe over the next 5 years?
Christopher Nassetta
Wow, there are a lot of them. I would say, I mean, where we have what we call inside the company springboard work, which is where we see sort of the disconnect in terms of demand for our products and what is a relatively low existing base of hotels. So I would say, you know, India being, you know, first and foremost, I mean, we think easily it’s a 10 or 20x sort of opportunity. We have whatever, 40 hotels in India. I mean, with the deals like the one we announced today, we sort of have 400 in and around the pipeline or under development. So India is definitely one. Southeast Asia is another where we have a big presence, but we think the opportunity is to be 3 or 4 times the size that we have. CALA, the broader CALA environment, you know, we’ve got a big presence of 300 hotels, but we think we could be easily 2 or 3 times that size. KSA, you know, we have 25, 30 hotels. We think we can easily be 4 to 5 times that, probably even more. As well as other parts of the Middle East. Obviously, the Middle East we just talked about. There’s some challenges, but, you know, in part because I’m always an optimist, but I do think one way or another this will settle down. And there’s a lot of momentum underlying travel and tourism in the Middle East that I think will pick up pretty quickly when you get to the other side of this conflict. So, I mean, you know, and I shouldn’t forget Africa. Where, you know, huge population, what is, you know, we’ve been there many — for many, many decades but have a relatively small base and a huge opportunity. And so, yeah, you know, the reality is we’ve got 27 brands and if you look at the average number of brands that’s deployed in any market, I think it’s like, 4 brands with 27. So even where we have more density, there’s a tremendous amount of network yet to build and thus growth. And then in the markets I just covered, I would argue in almost all of them other than maybe Cali where we have 300 hotels, the others were in sort of our nascent stages. The brand’s well-known, we perform really well, we’ve had a presence a long time, But relative to the populations and the demand base, we’re just getting started. So it’s why we get really excited when we think about, you know, I get the question, well, how long can you grow 6 or 7%? And, you know, my view is a long, long time, you know, simply because, you know, the world’s a big place, populations all over the world need to be served. They’re all, you know, in most of the markets I just described, they’re way underserved relative to any of the other more mature markets. And, you know, yet our brands do well there. Customers recognize us and it’s an opportunity to really build a powerful network effect in many of those places.
Duane Pfennigwerth
Thank you.
Operator
Ladies and gentlemen, this concludes our question and answer session. I would like to turn the conference back over to Chris Nassetta for any additional or closing remarks. Please go ahead.
Christopher Nassetta
Thanks everybody. As always, we appreciate the time. As you can tell, you know, there’s a lot going on in the world. There’s no question about it. The Middle East is not helpful, but 75% of our business is still driven out of the US, and we have seen really nice uptick in performance driven by a really nice uptick in demand across all segments. We think that is sustainable as we look out for the rest of the year and beyond. And so notwithstanding everything going on in the world, we feel really good about our ability to drive top line, drive unit growth, obviously the free cash flow that we need to drive and keep returning capital as a serial compounder. So yeah, we feel great about the business. Look forward to catching up with you. After the second quarter to give you the update on everything going on.
Operator
The conference has now concluded. Thank you for attending today’s presentation. You may now disconnect.