Patrick Scholes

Patrick Scholes asked about the expected quarterly cadence for 2026, specifically regarding tour growth and VPG for Q1 and subsequent quarters, and sought clarification on the Q4 loan loss provision uptick related to Bluegreen owner upgrades.

Answer

CEO Mark Wang highlighted 2025's operational and financial progress, including investments in lead flow and strong cash flow. CFO Dan Mathewes detailed Q1 2026 expectations, including high single-digit tour growth mitigated by a high single-digit VPG decline due to tough comparisons. He explained that Q1 EBITDA would be slightly down due to license fee pressures, financing business optimization, and provision rates, but expected sequential improvement throughout the year as headwinds subside. Regarding the Q4 loan loss provision, Dan Mathewes clarified that the portfolio is performing well, with underwriting changes improving originated loan performance. The uptick was an accounting effect where the release of reserves for old loans (from acquired portfolios) goes through financing, while new loans are fully reserved in real estate, particularly due to strong Bluegreen owner upgrade trends. He anticipates the provision returning to mid-teens in 2026.

Patrick Scholes from Truist Securities inquired about Hilton Grand Vacations' expected quarterly cadence for tour growth and VPG, seeking specific projections for each quarter, and later asked for clarification on the Q4 loan loss provision uptick related to Bluegreen owner upgrades.

Answer

CEO Mark Wang discussed overall progress and confidence in tour flow, noting 2026 EBITDA is expected to grow slightly ahead of sales. CFO Dan Mathewes detailed Q1 expectations of high single-digit tour growth offset by high single-digit VPG decline due to tough comparisons. He explained that cost pressures from license fees, financing optimization, and provision will lead to slightly lower Q1 EBITDA, with sequential improvement throughout the year as package pipeline investments mature and headwinds subside. Regarding the loan loss provision, Mr. Mathewes clarified that the Q4 uptick was due to purchase accounting, where the release of reserves for original acquired loans goes through financing, while new upgrade loans are fully reserved in real estate, leading to a higher reported provision rate despite strong portfolio performance and improved underwriting processes.

Asked for clarification on the 2025 outlook regarding tour flow and VPG growth, the mechanics of the new financing optimization program, and whether HGV experienced similar sales softness in February as a peer.

Answer

Executives expect mid-to-high single-digit contract sales growth in 2025, driven by low to mid-single-digit growth in both tours and VPG. The financing optimization program involves increasing the pace of securitizations to generate more immediate cash for share repurchases, ramping over 18 months. Unlike a peer, HGV has not seen any sales softness in February and momentum from Q4 has continued.

Patrick Scholes asked about the balance between cost cuts and revenue growth to achieve the $950 million EBITDA target within three years, the impact of impairments on future product costs, the reassessment of the long-term net debt to EBITDA target, and the potential rescheduling of an investor day.

Answer

Matthew Avril, CEO, stated that while cost structure is a current focus, future EBITDA growth will be rooted in expanding tour flow, increasing owner engagement, and leveraging existing assets more efficiently without requiring new resort development. Jason Marino, EVP and CFO, clarified a $10 million product cost benefit in 2026 from impairments, but noted overall product cost is still expected to increase. Marino also reiterated a long-term net debt to EBITDA target in the 'threes' and mentioned that an investor day is top of mind but too soon to schedule.

Patrick Scholes asked for an update on the company's long-term net debt to EBITDA target, recalling a previous ideal metric of three times. He also inquired about the potential rescheduling of an investor day.

Answer

Jason Marino, Executive Vice President and Chief Financial Officer, stated that the long-term net debt to EBITDA target remains 'in the threes,' with a focus on getting below four times first through cash flow generation. He indicated that an investor day is 'top of mind' but it is currently 'a little too soon' to reschedule due to ongoing work.

Patrick Scholes from Truist Securities asked for a granular breakdown of the 2025 G&A forecast, seeking to understand the net impact of various pushes and pulls—such as higher incentive compensation and IT spending versus cost savings—on the 2024 baseline G&A of $243 million.

Answer

Jason Marino, EVP and CFO, confirmed a ~$15-20 million increase from incentive compensation and higher IT project spending. John Geller, President and CEO, clarified that cost savings from the modernization initiative are spread across business lines, not just G&A. Marino then specified that approximately $10 million of the savings are expected to benefit the G&A line item.

Patrick Scholes asked for an update on possible development or expansion at the Gaylord Rockies and inquired about the drivers behind a sizable year-over-year increase in in-year for the year cancellations in the quarter.

Answer

Mark Fioravanti, President and Chief Executive Officer, and Colin Reed, Executive Chairman, discussed ongoing expansion work at the Rockies, expressing bullishness on the market and noting that prior investments were made to accommodate expansion. Patrick Chaffin, Chief Operating Officer, clarified that cancellations were up 3,000 room nights but down significantly from Q3 and in line with pre-COVID levels, driven by company-specific reasons like C-suite turnover, not macroeconomic factors. Colin Reed added that good contracts help collect profitability loss from close-in cancellations.

Patrick Scholes inquired about the latest thoughts on possible development or expansion at Gaylord Rockies and asked for details on the sizable year-over-year increase in in-the-year for-the-year cancellations in the quarter, specifically if it was government shutdown related.

Answer

Mark Fioravanti, President and Chief Executive Officer, confirmed ongoing work on expansion at Gaylord Rockies, expressing bullishness on the market despite local issues like property taxes. Colin Reed, Executive Chairman, added that demand is strong, and they are closer to initiating expansion. Patrick Chaffin, Chief Operating Officer, clarified that cancellations were up 3,000 room nights but significantly down from Q3, aligning with pre-COVID levels and primarily driven by company-specific reasons (CEO/C-suite turnover), not macroeconomic factors. Colin Reed emphasized their strong contracts for recovering profitability loss on close-in cancellations.

Patrick Scholes asked if Choice Hotels would provide guidance on its expected return of capital, specifically a combined range for share repurchases and dividends.

Answer

Patrick Pacious (CEO) stated that Choice Hotels does not typically provide guidance on capital return. He reiterated the company's capital allocation framework: prioritizing organic investments, evaluating meaningful M&A, and then returning excess cash flow to shareholders through dividends and share repurchases. He confirmed that the company will continue to evaluate these opportunities and report on capital allocation as the year progresses.

Patrick Scholes asked if the company provided guidance for expected return of capital, specifically share repurchases and dividends, for 2026.

Answer

Patrick Pacious, President and CEO, confirmed that the company did not provide guidance for capital returns, as is typical. He reiterated the capital allocation framework: organic investments first, then accretive M&A, and finally returning excess cash flow to shareholders through dividends and share repurchases. He noted that the company will report on capital allocation as the year progresses.

Patrick Scholes from Truist Securities questioned why the 2025 EBITDA growth guidance is in the mid-single digits, below the previously communicated long-term target of high-single digits, and also asked about any observed impact from immigration issues on franchisee labor.

Answer

CEO Patrick Pacious attributed the moderated guidance primarily to the high-interest-rate environment muting new construction across the industry. He noted that a pickup in new construction and stronger RevPAR performance could push results to the higher end of the range. Regarding the second question, Pacious stated they have not heard of any impact on franchisees' ability to hire or retain employees due to immigration issues.

Patrick Scholes asked for a breakdown of the raised full-year RevPAR guidance, seeking to quantify how much of the improvement is attributable to organic strength versus hurricane-related demand.

Answer

CEO Patrick Pacious estimated that hurricane impact accounts for about 40-50 basis points of the full-year RevPAR. He emphasized the guidance increase is primarily driven by broad-based organic strength, including occupancy gains and performance in regions and segments unaffected by the storms.

Patrick Scholes first asked about the RevPAR impact of the government shutdown in Q4 and the resulting easy comp for the next Q4. He then sought more details on the Revo Hospitality Group bankruptcy, specifically if it related to the $44 million investment made in 2022.

Answer

Interim CFO Kurt Albert clarified that the government shutdown had a minor RevPAR headwind of about 50 basis points in Q4 2025, creating a small tailwind for Q4 2026. Regarding Revo, he confirmed the insolvency was tied to loan investments made earlier in the year, noting the company learned of the filing in January during year-end financial preparations. He emphasized that Revo was an outlier due to its size and capital deployed.

Patrick Scholes asked to quantify the RevPAR impact of the government shutdown in Q4 2025 and sought more details on the Revo Hospitality Group bankruptcy, specifically if it was related to a $44 million investment made in 2022.

Answer

Interim CFO Kurt Albert stated the government shutdown was a headwind of approximately 50 basis points in Q4 2025. He confirmed the Revo insolvency was tied to earlier loan investments and that the company learned of the filing in January during year-end financial statement preparation, noting it's too early to speculate on potential outcomes.

Patrick Scholes of Truist Securities questioned if the low-teens growth expectation for ancillary revenues still holds given declining consumer confidence and asked for a clarification of what constitutes 'contracted' revenue.

Answer

CFO Michele Allen reaffirmed the low-teens growth forecast for ancillary revenues in 2025, with further growth expected in 2026. She explained that a significant portion is contract-based, providing durability. The largest driver, the co-branded credit card, is insulated from RevPAR swings as only one-third of card spend is in the travel category. She clarified that 'contracted' revenue refers to agreements, like with licensees, that have a minimum payment floor, providing a stable base.

Patrick Scholes asked for an update on the company's franchisee retention rate, whether it is approaching the 96% target, and if there is a difference between U.S. and international retention.

Answer

CFO Michele Allen and CEO Geoffrey Ballotti reported significant progress, with the global retention rate now at 95.7%, up 40 basis points year-over-year. They described the 96% level as a 'first stop' with room for further improvement. They emphasized a focus on improving the global rate by swapping lower-value terminations for higher-value new rooms, but did not provide a U.S. versus international breakout.

Patrick Scholes asked for an update on the consumer's financial health, particularly given the bifurcated economic environment, and sought clarification on the expected reduction in the loan loss provision for 2026 and the dynamics behind the Q4 2025 provision rate.

Answer

President and CEO Michael Brown reported no significant change in consumer demand or purchasing, attributing continued strong performance to improved consumer demographics (household income above $100,000, FICO scores over 740) and the perceived value of pre-inflationary vacation prices. CFO Erik Hoag confirmed expectations for the loan loss provision to be lower in 2026, guiding towards approximately 20%, and noted that Q4's 19.3% rate was primarily driven by larger down payments.

Patrick Scholes asked for an update on the Travel + Leisure Co. consumer's financial health, given the broader economic bifurcation. He also questioned the expected magnitude of the loan loss provision decrease in 2026 and the specific dynamics that led to the year-over-year drop in Q4 2025.

Answer

Michael Brown, President and CEO, noted no significant change in consumer demand or purchasing behavior from 2025, attributing continued strong performance to a focus on consumer quality (household income above $100,000, average FICO over 740) and the value proposition of their vacations. Erik Hoag, CFO, confirmed expectations for the loan loss provision to be down year-over-year in 2026, guiding towards roughly 20%, and highlighted larger down payments in Q4 2025 as the primary driver for the more favorable provision.

Patrick Scholes of Truist Securities inquired about the performance of the summer rental business for non-owners and the sales mix between existing owners and new buyers, questioning if a shift towards more upgrades was occurring.

Answer

President and CEO Michael Brown stated that summer rental demand and forward bookings are solid and in line with expectations. He clarified that the new owner sales mix in Q1 returned to historical levels after an unusually high 2023. Mr. Brown confirmed that while owner close rates were slightly up and new owner close rates were slightly down, the company's long-term target for a 35-40% new owner mix remains unchanged.

Patrick Scholes asked about the expected impact of the current interest rate environment in 2025 and the timeline for Sports Illustrated announcements.

Answer

Executive Michael Hug stated that due to rising benchmark rates, the impact from ABS interest expense in 2025 is now expected to be flat to a slight headwind, rather than a tailwind. President and CEO Michael Brown confirmed that the company expects to announce new Sports Illustrated locations this year, with a focus on property conversions to accelerate the timeline for starting sales in 2025.

Patrick Scholes, also known as Charles Scholes, requested an update on the Sports Illustrated initiative, including its current status, long-term vision, and the potential timeline to achieve a previously mentioned scale of $300 million to $500 million in business.

Answer

CFO Michael Hug clarified that new brands like Sports Illustrated are expected to collectively become a $300-$400 million business over the long term. He suggested a growth cadence similar to the Wyndham 'Blue Thread' partnership, projecting an annual ramp-up of approximately $25-$30 million once sales commence.

Patrick Scholes inquired about Hilton's credit card contract, specifically asking if there are any provisions for a step-up in the royalty rate and the likelihood of such a trigger.

Answer

Chris Nassetta, President and CEO of Hilton Worldwide, stated that while they cannot legally disclose all contract terms, Hilton feels very good about its contractual relationship with Amex, which was renegotiated a couple of years ago. He highlighted the strong growth rate built into the contract and the natural growth driven by customer acquisition and spend. Nassetta advised against expecting any major announcement regarding a step-up, emphasizing that the program is performing well and growing above algorithm.

Patrick Scholes, Managing Director and Senior Equity Research Analyst at Truist Securities, inquired about Hilton's existing credit card contract, specifically if there are provisions for a step-up in the royalty rate and the likelihood of such a trigger.

Answer

Chris Nassetta, President and CEO of Hilton Worldwide, stated that Hilton cannot legally disclose all contractual terms but expressed strong confidence in the existing relationship with Amex, which was renegotiated a couple of years prior. He highlighted the favorable growth rate built into the contract and the natural growth from customer acquisition and spend. Nassetta advised against expecting any 'big announcement' regarding a step-up, reiterating that the program is performing well and expected to continue growing above algorithm for many years.

Patrick Scholes asked if Hilton's franchisees are experiencing the significant construction cost increases of 20-40% that have been reported by franchisees of competing hotel companies.

Answer

CFO and President, Global Development, Kevin Jacobs responded with a direct 'No.' He stated that while such high increases were an initial fear, they have not materialized for Hilton's developers. He clarified that construction costs were trending up in the mid-single-digit range (3-5%) coming into the year, and that trend has remained stable.

Patrick Scholes inquired about the potential impact of tariffs on Hilton's franchisees and developers, asking what management is hearing from these partners and how the company is mitigating risks.

Answer

Christopher Nassetta, President and CEO, stated that there has been no real impact so far, viewing tariffs as part of broader trade negotiations. He expressed confidence that major tariffs will likely be avoided. Furthermore, he highlighted that Hilton has aggressively diversified its supply chains over the last five years, creating flexibility to pivot and source products from various parts of the world, which significantly mitigates potential disruption.

Patrick Scholes asked about Hilton's ROI targets when developing brands internally versus acquiring them, and whether recent 'tuck-in' brand acquisitions were immediately accretive to earnings.

Answer

CFO Kevin Jacobs explained that the ROI for building brands organically is 'near infinite,' making it the preferred path from a pure financial perspective. However, he confirmed that recent strategic acquisitions, like Graduate Hotels, were structured to be accretive 'out of the box.' These deals allowed Hilton to acquire specific strategic assets by taking advantage of favorable conditions in the market.

Patrick Scholes asked about the bifurcation of Las Vegas locals play, specifically distinguishing between real locals and destination locals, and their respective trends in Q4 2025 and into the new year. He also inquired about the M&A pipeline and the company's stance on whole assets versus OpCo structures.

Answer

President and CEO Keith Smith highlighted strong play from Las Vegas local residents but noted weakness in true destination play, which led to a $6 million decline in hotel revenue, primarily at the Orleans. CFO Josh Hirsberg added that destination weakness also broadly impacts gaming and F&B, and affects larger regional hotels like IP Biloxi. Regarding M&A, Keith Smith stated the company remains interested with a disciplined approach, willing to accept OpCo structures despite preferring HoldCo. Josh Hirsberg emphasized the strong balance sheet for acquisitions but reiterated the focus on efficient operations, reinvestment, and capital returns.

Patrick Scholes asked about the bifurcation of Las Vegas locals play between true residents and destination visitors, inquiring about their respective trends in Q4 2025 and into the new year. He also asked for updated thoughts on Boyd Gaming's M&A pipeline and the overall environment for whole assets or OpCo structures.

Answer

President and CEO Keith Smith clarified that Las Vegas locals play from residents was strong, while true destination play showed weakness, leading to a $6 million decline in hotel revenue, primarily at the Orleans. CFO Josh Hirsberg added that destination weakness broadly impacts gaming and F&B, affecting larger hotels like IP in the Midwest and South. Regarding M&A, Mr. Smith stated the company remains interested and disciplined, seeking the 'right asset in the right market at the right price.' Mr. Hirsberg emphasized their strong balance sheet but reiterated the need for the 'right opportunity,' prioritizing reinvestment and shareholder returns.

Patrick Scholes asked if Vail Resorts would consider an 'Ikon Pass type of pass' offering a premium experience, and about the contribution of the relationship with Telluride and the Epic Pass to Vail's overall earnings, particularly in light of a potential strike.

Answer

Rob Katz, CEO of Vail Resorts, confirmed that 'everything is always a consideration' for premium experiences, noting that Vail already offers options like private clubs, dining, and ski school for upper-end guests. He clarified that Telluride does not directly contribute to Vail's earnings, but access to Telluride helps drive pass sales. He confirmed there are no direct earnings from Telluride for Vail Resorts, as it is primarily a pass relationship.

Patrick Scholes from Truist Securities questioned the dividend coverage at the lower end of the fiscal 2026 guidance, asking about the company's comfort with potentially taking on debt to maintain the dividend and their acceptable net leverage ratios. He also followed up by inquiring about trends in international guest visitation, specifically for Mexico, Europe, and Canadians, and whether any "negative rhetoric" has impacted the pace of sales since the May update.

Answer

CEO Rob Katz expressed strong comfort with current leverage ratios, citing the business's stability as justification for current dividend levels and willingness to slightly increase leverage if needed. He clarified that any future dividend increases would require material improvements in free cash flow. Regarding international guests, Katz stated that no trends were material enough to affect overall results, noting no specific evidence of a shift in future international visitation. He acknowledged a historical decline in international visitation over the past 5-8 years due to factors like the strong dollar and past rhetoric, but does not see it as a major issue for the upcoming season.

Patrick Scholes asked about the company's dividend coverage, noting that at the low end of the guidance, the dividend might not be fully covered by free cash flow. He inquired about the company's comfort with taking on debt to maintain the dividend and their acceptable net leverage ratios. He also asked about trends in international guest pass sales, specifically for Mexico, Europe, and Canada, and if negative rhetoric has impacted the pace since the May update.

Answer

CEO Rob Katz affirmed comfort with current leverage ratios, citing business stability, and expressed comfort with maintaining current dividend levels even if it means a slight increase in leverage. He clarified that a material improvement in free cash flow would be required for a dividend increase. Regarding international guests, Mr. Katz stated there are no material trends significantly affecting overall results and no specific evidence of a shift in future international visitation. He acknowledged a decline in international visitation over the past 5-8 years due to various factors but does not see it as a major issue for the upcoming season.

Patrick Scholes of Truist Securities asked for an opinion on the performance gap between Epic Pass and the competitor Icon Pass, which is reportedly seeing sales growth. He also asked for the rationale behind Vail's centralized operating strategy versus a competitor's decentralized approach.

Answer

CEO Kirsten Lynch attributed the difference in pass sales growth to different stages in the product life cycle, noting Epic Pass is a more mature product now targeting lower-frequency skiers. Regarding operations, Lynch clarified that Vail centralizes support functions like HR and finance for efficiency, but core mountain operations decisions (terrain, labor, safety) are decentralized and managed at the resort level, a strategy she believes is highly successful.

Patrick Scholes asked Mark Hoplamazian about his current sentiment on China, comparing it to his more cautious and conservative view three months prior.

Answer

Mark Hoplamazian, President and CEO of Hyatt, expressed incrementally better sentiment on China after a recent visit. He highlighted strong performance of luxury brands, continued meaningful openings (e.g., Alila Shanghai, Andaz Macau), and robust rooms business despite weaker food and beverage revenues due to government pressure. He also noted signs of government policy shifts to support consumer purchases and the ongoing resolution of the Evergrande debt overhang.

Patrick Scholes asked Mark Hoplamazian about his current sentiment regarding the China market, comparing it to his more cautious and conservative view three months prior.

Answer

Mark Hoplamazian, President and CEO, Hyatt, expressed incrementally better sentiment on China. He highlighted strong performance of luxury brands, new openings like Alila Hotel in Shanghai outperforming previous brands, and growth in upper-upscale and luxury segments. He acknowledged weaker food and beverage revenues due to government pressure on conspicuous consumption but noted strong rooms business and signs of the government pivoting to more constructive policies to support consumer purchases.

Patrick Scholes asked for the reasons behind the Q4 adjusted EBITDA miss despite strong RevPAR, and also inquired about the booking trends for the ALG Vacations business.

Answer

CFO Joan Bottarini explained the miss was primarily due to onetime G&A costs, including bad debt reserves, and lower-than-expected performance in the distribution business. The latter was impacted by a hurricane and softer bookings for lower-tier hotel chains served by ALG Vacations. She expects the distribution segment to be flat to incrementally positive in 2025.

Patrick Scholes inquired about the latest development trends within Marriott's APAC and Greater China regions, seeking insights into rooms growth and signing activity.

Answer

CFO Leeny Oberg expressed enthusiasm for double-digit rooms growth and disproportionate share of signings in both APAC and Greater China. She noted APAC's pipeline is 15% of total (vs. 8% existing rooms) with strong growth in India, Indonesia, and Japan across all chain scales. Greater China's pipeline is 18% of total (vs. 11% existing rooms), concentrated in the upscale tier due to lower volatility and unit costs, with year-to-date room signings up 24% year-over-year. President and CEO Tony Capuano reiterated the 24% year-over-year increase in Greater China room signings through Q3.

Patrick Scholes asked for an update on the latest development environment trends specifically within the APAC and Greater China regions.

Answer

Leeny Oberg (CFO and EVP of Development) reported double-digit rooms growth and a disproportionate share of signings in Asia. She highlighted rapid economic growth in APAC (India, Indonesia, Japan) driving demand for lodging, with Marriott outperforming competitors. In Greater China, growth is concentrated in the upscale tier due to lower volatility and unit costs, with strong demand for Marriott brands. Tony Capuano (President and CEO) added that year-to-date room signings in Greater China are up 24% year-over-year.

Patrick Scholes from Truist Securities asked if the uptick in group booking attrition reported by other operators was a broader trend seen across Marriott's portfolio. He questioned how potential attrition might affect the reported 6% group pace for the current year.

Answer

CEO Tony Capuano stated that higher attrition is 'not a trend we're seeing across our broader state' and suggested it might be an issue specific to certain types of properties. CFO Leeny Oberg added that any moderation in the final group numbers typically results from 'in the year, for the year' booking patterns rather than cancellations.

Patrick Scholes of Truist Securities asked about Marriott's appetite for tuck-in acquisitions in the coming year and whether the company was observing any travel pullback from Canadian and Mexican visitors due to political tensions.

Answer

CEO Tony Capuano stated that the company's capital allocation philosophy remains unchanged, with a focus on organic growth, but they will consider tuck-in acquisitions to fill strategic gaps. CFO Leeny Oberg noted it was too soon to see any impact from Canadian and Mexican travelers, emphasizing that they represent a very small portion of U.S. room nights.

Patrick Scholes requested an update on the search for a new brand president for Norwegian Cruise Line. He also asked for clarification on the changes in Oceania's selling strategy, specifically regarding recent unbundlings.

Answer

Harry Sommer (President and CEO) stated that an extensive search for a world-class NCL brand president is deep into the process, with an announcement hoped for soon. He described Oceania's selling strategy changes, including recent unbundlings, as 'relatively modest,' based on customer value data, designed to optimize for guests and maximize yields and margins. He expressed satisfaction with Oceania's consistent booking levels.

Patrick Scholes asked for an update on the progress of finding a new brand president for Norwegian Cruise Line and about the changes in selling strategy, specifically recent unbundlings, with the Oceania brand.

Answer

Harry Sommer (President and CEO) stated that the search for a new brand president is extensive and deep, attracting world-class talent, with an announcement hoped for soon. Regarding Oceania's selling strategy, he described recent changes as "relatively modest," aligning promotions with customer value to optimize yields and margins, and expressed satisfaction with Oceania's consistent bookings and revenue.

Patrick Scholes requested an update on the progress and timing of the new pier at Great Stirrup Cay and asked about any potential future developments for the private island.

Answer

CEO Harry Sommer confirmed the new pier is on schedule to open in Q4 2024, which will enable the company to double the number of guest visits starting in 2026, creating a 'virtuous cycle' of satisfaction and revenue. While the company constantly reviews assets for ROI and guest experience improvements, he had no further developments to announce for the island at this time.

Patrick Scholes asked about non-price promotional activities, such as add-ons or cabin upgrades, and whether there have been any changes in strategy this spring. He also sought to confirm that booking trends accelerated in April with no softness.

Answer

Chairman and CEO Torstein Hagen stated that Viking's primary method is to 'market more' and that the company shies away from other promotional incentives, confirming no change in this strategy. President and CFO Leah Talactac confirmed his understanding was correct, stating, 'Yes, that's right,' in response to the observation of accelerating booking trends in April.

Patrick Scholes asked if there had been any change in non-price promotional activities, such as add-ons or cabin upgrades, compared to historical norms. He also sought direct confirmation that booking trends in April showed no softness and were, in fact, accelerating.

Answer

Chairman and CEO Torstein Hagen responded that Viking's strategy is to 'market more' and avoid such incentives, confirming there has been no change in their promotional approach. President and CFO Leah Talactac explicitly confirmed that booking trends in April were accelerating and showed no softness.

Patrick Scholes asked for an update on Viking's capital return strategy, noting the company's rapidly improving and soon-to-be underlevered balance sheet. He followed up by asking if Viking intends to maintain a more conservative long-term leverage profile than its peers.

Answer

CFO Leah Talactac reiterated the commitment to a balanced capital allocation framework, prioritizing reinvestment in the business and maintaining a large cash reserve for flexibility and potential acquisitions. She stated that dividends or share buybacks are not currently contemplated and that the company has not set specific leverage targets as it is in a growth period.

Patrick Scholes of Truist Securities followed up on the company's comment about geopolitical volatility, asking if this had a tangible impact on the booking pace as the quarter progressed.

Answer

CEO Josh Weinstein acknowledged that while there were ups and downs, the overall result was strong, suggesting people are adapting to a 'new normal.' He highlighted that recent booking volumes were ahead year-over-year, and close-in bookings for the second quarter were 'off the charts,' indicating resilient demand despite the backdrop.

Patrick Scholes asked for an update on proposed passenger tax increases in Mexico and the potential impact on itineraries. He also noted a divergence in the growth rates of passenger ticket revenue and commissions, asking if this indicated a shift to more direct bookings.

Answer

CEO Josh Weinstein stated the Mexico tax is 'not a done deal' and that the company is in active dialogue with the government, which he believes was misinformed. The potential tax is not in the forecast and would affect less than 5% of 2025 itineraries. CFO David Bernstein addressed the revenue versus commission question, stating there was no significant channel shift to report and that minor quarterly variations can be caused by currency and air travel mix.

Patrick Scholes requested more granular, quarter-by-quarter detail on the expected increase in dry dock days for 2025. He also asked about long-term development plans for Half Moon Cay beyond the new pier, such as the addition of a water park.

Answer

CFO David Bernstein deferred the dry dock question, advising a follow-up with investor relations for specific details. CEO Josh Weinstein addressed the Half Moon Cay plans, stating there are more enhancements coming but "absolutely not" a water park. He emphasized that Half Moon Cay's appeal is its "naturally beautiful white sand beach," which they intend to preserve, contrasting it with the entertainment-focused Celebration Key.

Patrick Scholes asked what level of total expense growth is assumed in the midpoint of the company's 2025 guidance.

Answer

Bryan Giglia, Chief Executive Officer, responded that the guidance bakes in total expense growth in the 4% to 4.5% range. This figure accounts for higher labor costs, easing real estate taxes, stable insurance costs from a mid-year renewal, and slightly higher utility expenses.

Patrick Scholes asked if Park Hotels has observed any impact on Canadian travel to its Florida properties, given that Canada is a key international source market for the state.

Answer

Chairman and CEO Thomas Baltimore responded that they have not seen any softening or slowdown in demand from Canadian travelers at their Florida properties at this point, but they continue to monitor the situation.

Patrick Scholes asked for expectations on inbound Japanese travel to Hawaii for Q4 and 2025, and whether Hilton is proactively notifying guests about the ongoing labor strikes.

Answer

Chairman and CEO Thomas Baltimore stated that the 2024 forecast for Japanese visitors is now around 720,000, down from earlier estimates due to weather but still up 22% year-over-year. He anticipates a full recovery to pre-pandemic levels by 2026-2027. Regarding guest notifications, he explained that the operator (Hilton) handles communications and that the strikes are publicly known. He also noted progress, with labor agreements reached in Boston and San Jose.

Asked about conservatism in guidance for future hurricanes and sought specifics on insurance cost reductions and expected wage growth.

Answer

Guidance does not include conservatism for potential future hurricanes. Insurance costs are flat to slightly down and represent 5-7% of the cost base. Wage growth is expected to be in the mid-to-high single digits (4-6%) and remains a significant headwind.

Patrick Scholes from Truist Securities asked for clarification on the pricing language for 2023, an update on direct versus travel agency booking trends, and the key drivers behind the improved 15% fuel consumption reduction forecast for 2023.

Answer

CEO Josh Weinstein clarified that the pricing language does not reflect a significant change and noted that the travel agency channel is recovering strongly. CFO David Bernstein detailed the fuel savings, attributing 9 percentage points to fleet optimization (newer, more efficient ships) and the remaining 6 points to itinerary optimization and technology investments.