Trey Bowers

Trey Bowers inquired about the company's high free cash flow generation, its historical use of share repurchases during dislocation, whether it might become more formulaic with repurchases, and how current share levels impact capital allocation for new projects.

Answer

CEO Bill Carstanjen acknowledged strong cash flow, a reflection of company building and tax law changes. He stated that share repurchases remain an important element of capital management, balanced against other uses like investment and leverage, all aimed at generating the highest shareholder returns. He emphasized the benefit of having options and cash.

Trey Bowers inquired about the company's high free cash flow generation, whether share repurchases might become more formulaic, and how capital allocation dynamics change with current share levels and new projects.

Answer

William C. Carstanjen, CEO of Churchill Downs Incorporated, acknowledged the strong cash flow, attributing it to the company's operational strength and tax law changes. He affirmed that share repurchases remain an important element of capital management, constantly evaluated against other uses of cash to ensure the highest returns for shareholders. He emphasized the benefit of having options and sufficient cash for capital allocation decisions.

Trey Bowers inquired about the working capital and other drag experienced in 2025 and whether a reversal is expected in 2026. He also sought more granular detail on the reduction in capital outlays, specifically if it's driven more by increased distributions/proceeds or lower contributions.

Answer

Patrick Pacious (CEO) confirmed that most of the working capital drag from 2025, primarily related to the timing of tax payments, is expected to reverse in 2026. Regarding the reduction in capital outlays, he clarified that the significant 70% reduction is primarily driven by lower outlays, specifically the tapering down of Everhome Suites investments and the completion of Cambria Hotels development. He noted that while recycling of existing hotel capital is expected to be in a similar range to 2025 ($32 million), the main driver of the reduction is the decrease in new capital contributions.

Trey Bowers inquired about the expectation for a reversal of the working capital and other drag from 2025 into 2026, and requested more granular detail on the capital outlay reduction for 2026, specifically if it's due to lower contributions or increased distributions/proceeds.

Answer

Scott Oaksmith, Chief Financial Officer, confirmed that most of the working capital and other drag from 2025, primarily due to timing of tax payments, is expected to reverse in 2026. Regarding capital outlay reduction, Scott Oaksmith clarified it's a combination of both lower outlays (tapering Everhome and Cambria investments, lower key money per unit) and expected recycling of existing hotel capital, with the 70% reduction primarily driven by outlays. He mentioned $32 million in recycling for 2025, expecting a similar range for 2026 with potential for more if the transaction market rebounds.

Trey Bowers asked about the specific midscale and above brands that are driving domestic growth and could further accelerate the pace, and whether domestic net room growth (NUG) for 2026 is expected to be similar to 2025 or accelerate.

Answer

CEO Geoff Ballotti indicated that domestic NUG growth for 2026 is expected to be similar to 2025. He highlighted strong performance in economy brands like Days Inn, Super 8, and Travelodge, which showed double-digit growth. For midscale and above, he pointed to prototype brands like La Quinta and Hawthorn Suites, particularly in new construction, and emphasized the excitement around extended stay brands including ECHO Suites (economy), Hawthorn Suites (midscale), and WaterWalk (upscale).

Trey Bowers asked about the specific brands driving excitement and potential acceleration in the domestic midscale and above pace, and whether a similar level of domestic net room growth is expected in 2026 compared to 2025.

Answer

CEO Geoff Ballotti confirmed that a similar level of domestic net room growth is a fair expectation for 2026. He highlighted strong performance in economy brands like Days Inn, Super 8, and Travelodge, which saw double-digit growth. In midscale and above, prototype brands like La Quinta and Hawthorn Suites are performing well in both new construction and conversions, with extended stay brands like Echo Suites, Hawthorn Suites, and WaterWalk also showing strong momentum.

Trey Bowers asked about the longer-term outlook for the loan loss provision, specifically if it's expected to settle into the high teens, and for expectations regarding the Travel and Membership business, including when it might base out or if top-line pressure is expected to continue.

Answer

President and CEO Michael Brown (initially, then CFO Erik Hoag) stated that the loan loss provision is expected to settle into the high teens over time, with 2026 representing a step in that direction from 20.7% in 2025. Michael Brown then addressed the Travel and Membership business, modeling 2026 consistent with 2025 trends, focusing on disciplined cost management and pragmatic leveraging of partners. Erik Hoag added that a structural contribution margin difference between exchange and travel clubs could lead to some broad-based erosion in segment margins over the longer term.

Trey Bowers asked about the longer-term trajectory of the loan loss provision, questioning if it would settle into the high teens or if 20% is an optimal level given improved FICO scores and income brackets. He also inquired about the future expectations for the Travel and Membership business, specifically when it might stabilize or if top-line pressure is expected to continue.

Answer

Michael Brown, President and CEO, expressed confidence that the loan loss provision would settle into the high teens over time, with 2026 being a step in that direction from 20.7% in 2025. Erik Hoag, CFO, stated that the Travel and Membership business is being modeled for 2026 consistent with 2025 trends, focusing on disciplined cost management and pragmatic leveraging of partners. He noted that while the travel clubs business is growing, a structural contribution margin difference between segments could lead to some broad-based erosion in segment margins over the longer term if current trends persist.

Trey Bowers asked for more insight into the strong growth in monthly unique payers for the digital segment, questioning how high this number can go, if it's the right KPI to focus on, and whether its growth should continue to accelerate.

Answer

Eric Hession (President of Caesars Sportsbook & Casino) explained that monthly unique payers is an industry-standard metric, and the company focuses on driving its components, such as retention, active wagers per customer, and cross-play with brick-and-mortar properties. He expects continued increases, driven by improvements in tech, customer service, and marketing, which enhance customer retention.

Trey Bowers asked for more insight into the strong year-over-year growth in monthly unique payers for the digital segment, inquiring how high this number can go, if it's the right KPI to focus on, and if the growth is expected to continue accelerating, particularly given the reported 19% growth in the quarter.

Answer

Eric Hession, President of Caesars Sportsbook & Casino, acknowledged the monthly unique payers metric as an industry standard. He explained that the growth is primarily driven by improvements in customer retention, increased active wagers per customer, and loyalty fostered by cross-play with brick-and-mortar properties. Hession stated that every activity, from technology and customer service to marketing, contributes to this improvement in unique customers. While not providing specific guidance on how high the number can go, he expects it to continue increasing, noting that even slight changes in retention over an 18-month period can significantly impact this metric.

Trey Bowers requested more granularity on the 2026 revenue guidance, specifically regarding handle, hold, and promotional spend expectations, and also inquired about the trend of monthly unique players (MUPs) and its relevance as a KPI.

Answer

Co-Founder and CEO Jason Robins explained that handle, hold, and promo interact, making a granular breakdown difficult, and reiterated the conservative guidance approach. He attributed the flat MUPs to lower customer acquisition in 2025 compared to 2024's outperformance, noting that revenue retention remains strong.

Trey Bowers asked for more granularity on the revenue guidance, specifically handle, hold, and promo expectations for the high and low ends of the range. He also inquired about the flat year-over-year monthly unique player (MUP) number, the impact of Jackpocket, and whether MUP is the right KPI to track.

Answer

Jason Robins (Co-Founder and CEO, DraftKings) explained that handle, hold, and promo interact, making a granular breakdown difficult due to variance and the impact of optimization efforts. He noted that a similar approach in 2025 led to a guidance miss. Regarding MUPs, Mr. Robins attributed the flat trend to lower customer acquisition in 2025 compared to the 'significant outperformance' in 2024, and the impact of Jackpocket. He clarified that while new customers churn, revenue retention for cohorts remains over 100% after the initial period. Excluding Jackpocket, MUPs grew approximately 5%.

Trey Bowers asked for signposts and a timeline for Wynn Al Marjan Island's opening, including when rooms would go on sale, and the necessity of incremental room capacity in the region. He also sought clarification on reported hotel expansion plans in Boston.

Answer

President & CEO Craig Billings indicated Wynn Al Marjan Island rooms would likely go on sale late Q3/early Q4 2026. He clarified that while incremental room capacity in the region is not essential for their base case, it would support outperformance, with construction underway and a strong transportation program planned. For Boston, he clarified Wynn is contemplating a land lease for a portion of its adjacent land for potential hotel development, not developing hotels on its balance sheet, as part of a broader neighborhood vision.

Trey Bowers inquired about key signposts for the Wynn Al Marjan Island (WAI) opening, including when rooms would go on sale, and the timeline for the surrounding area's full build-out and its necessity for WAI's targets. He also sought clarification on reports regarding a hotel expansion in Boston.

Answer

President & CEO Craig Billings indicated WAI rooms would likely go on sale late Q3/early Q4, with construction updates via press releases. He clarified that WAI's base case is not dependent on immediate incremental room capacity, but outperformance would require it, with a strong transportation program planned. For Boston, he explained Wynn is contemplating a land lease for a portion of adjacent land for hotel development, not building hotels on its balance sheet, as part of a broader neighborhood vision.

Trey Bowers, Director and Equity Analyst at Wells Fargo, asked about Hilton's inorganic growth strategy, specifically the M&A environment and whether opportunities are expected to pick up, given Hilton's strong organic growth.

Answer

Chris Nassetta, President and CEO of Hilton Worldwide, emphasized Hilton's long-standing focus on organic growth, noting that nearly all growth over 18-19 years has been organic, expanding from 8 to 26 brands. He described organic growth as Hilton's 'alpha' and a superior way to drive returns compared to acquisitions. While Hilton evaluates all opportunities, Nassetta stated he doesn't see anything 'real' on the M&A horizon and advised thinking of Hilton as an organic growth story. He believes Hilton can sustain 6-7% NUG organically for an extended period, driving free cash flow for share repurchases and compounding shareholder value.

Trey Bowers asked about Hilton's inorganic growth strategy, inquiring about opportunities in the M&A environment and whether an increase in such activities is expected, given Hilton's strong organic growth.

Answer

Chris Nassetta, President and CEO of Hilton Worldwide, reiterated Hilton's long-standing focus on organic growth, noting that nearly all of their expansion (from 8 to 26 brands) over 18 years has been organic. He views organic growth as the superior method for driving overall returns and building an industry-leading skill set. While Hilton evaluates all opportunities, Nassetta stated he doesn't see anything imminent on the M&A horizon and advised investors to consider Hilton primarily an organic growth story, focused on intelligent capital allocation through share buybacks.

Trey Bowers asked if Marriott expects business transient travel to return to pre-pandemic levels, and if not, how this might influence Net Unit Growth (NUG) strategies or hotel design, also touching on the trend of combined trip purposes.

Answer

CFO Leeny Oberg noted that comparing to 2019 is challenging due to Marriott's significant growth and market evolution. She expects classic business travel to return to 2019 demand levels, driven by the need for in-person meetings, but leisure will likely remain a stronger percentage of total nights. CEO Anthony Capuano added that the increasing trend of combined leisure and business trip purposes makes precise market mix analysis murkier, but the company feels good about the overall recovery of travel volumes.

Trey Bowers asked if business transient travel is expected to return to pre-pandemic levels, or if the world has changed, and how this might impact Marriott's net unit growth strategy or hotel design.

Answer

CFO Leeny Oberg noted that comparing to 2019 is challenging due to Marriott's growth and market evolution. She expects classic business travel, tied to economic activity, to return to pre-pandemic levels, but anticipates leisure will continue to be stronger. CEO Tony Capuano added that the ability to precisely identify trip purpose has become murkier due to combined leisure and business travel, but expressed confidence in the overall recovery of travel volumes.

Trey Bowers followed up on Marina Bay Sands' (MBS) Q4 exit rate, asking if applying seasonal growth levels would lead to significant top and bottom-line numbers, and if there are any factors to consider against this for the next 12 months.

Answer

Rob Goldstein, Chairman and CEO, stated that MBS defies typical seasonality, being driven more by the property's strength, customer base, and events rather than seasonal patterns. He advised against modeling based on seasonality.

Trey Bowers asked whether Viking's impressive committed ocean capacity growth would lead to significantly different itinerary mixes or primarily serve unmet demand in current regions. He followed up by asking if future itineraries would remain predominantly Europe/Northern Europe, or if more Caribbean/Asia or entirely new, unexplored destinations would be introduced, given the high repeat customer base. Finally, he inquired if the consistent product approach precludes non-organic cruise ship acquisitions, or if suitable luxury brands could be integrated.

Answer

Tor Hagen, Chairman and CEO, stated that new ocean capacity is primarily to meet existing unmet demand for 'more of the same' to more customers, as many itineraries are already sold out. Leah Talactac, President and CFO, added that Viking's demographic travels year-round, sees significant white space in the luxury ocean market (24% market share vs. 50%+ in river), and focuses on destination-focused itineraries in Europe, the Mediterranean, Nordic countries, and other exotic locations where larger ships cannot go, rather than the Caribbean. Tor emphasized customer trust for new destinations and the benefits of consistent, standard vessel design for cost efficiency and shipyard contracts. Regarding non-organic cruise ship acquisitions, Tor said 'never say never, but not far from it,' suggesting it would take a very special situation, possibly related to strategic assets like docking spaces, rather than confusing the brand with different cruise products.

Trey Bowers asked about Viking's impressive committed capacity growth for ocean, questioning if it targets untapped itineraries or aims to meet existing demand in current regions, and how the ocean business will develop. He also inquired about future itinerary mix (more Caribbean/Asia) and the potential for inorganic growth in cruise ships.

Answer

Tor Hagen, Chairman and CEO, stated that ocean capacity growth primarily meets existing demand in current regions, as many itineraries are sold out. He emphasized customer trust for new destinations and the benefits of Viking's standardized vessel design for consistency and cost efficiency. Leah Talactac, President and CFO, noted Viking's guests travel year-round and that Viking focuses on destination-rich areas, not the Caribbean, seeing white space for growth in Europe and exotic locations. Tor added that acquiring cruise ships is unlikely ('never say never, but not far from it'), but securing docking spaces could be an area for inorganic moves.