Feb 18, 2015
Executives
Christian Charnaux - VP, IR Chris Nassetta - President and CEO Kevin Jacobs - EVP and CFO
Analysts
Carlo Santarelli - Deutsche Bank Harry Curtis - Nomura. Joel Simkins - Credit Suisse Robin Farley - UBS Thomas Allen - Morgan Stanley Joe Greff - JP Morgan Felicia Hendrix - Barclays Shaun Kelley - Bank of America Steven Kent - Goldman Sachs Bill Crow - Raymond James Vince Ciepiel - Cleveland Research Rich Hightower - Evercore ISI Smedes Rose - Citigroup Chad Beynon - Macquarie
Operator
Good morning, ladies and gentlemen. And welcome to the Hilton Worldwide Fourth Quarter 2014 Earnings Results Conference Call.
All lines have been placed on mute to prevent any background noise. After the presentation, we will conduct a question-and-answer session.
[Operator Instructions] Please note that this call is being recorded today, Wednesday, February 18, 2015 at 10.00 AM Eastern Time. I will now turn the call over to your host, Christian Charnaux, Vice President, Investor Relations.
Please go ahead, Mr. Charnaux.
Christian Charnaux
Thank you, Sally. Welcome to the Hilton Worldwide fourth quarter and full year 2014 earnings call.
Before we begin, we would like to remind you that our discussions 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 are effective only as of today.
We undertake no obligation to publicly update or revise these statements. For discussion of some of the factors that could cause actual results to differ, please see the risk factor section of our most recently filed Form 10-K.
In addition, we will refer to certain non-GAAP measures on this call you can find reconciliations to GAAP measures discussed in today’s call in our earnings press release which was posted on our website at www.hiltonworldwide.com. This morning Chris Nassetta, our President and Chief Executive Officer will provide an overview of our fourth quarter and full year results and will describe the current operating environment as well as the company's outlook for 2015.
Kevin Jacobs, our Executive Vice President and Chief Financial Officer, will then provide greater detail on our results and outlook. Following their remarks we will be available to respond to your questions.
With that, I'm pleased to turn the call over to Chris.
Chris Nassetta
Thank you, Christian. Good morning, everyone and thanks for joining us today.
We’re thrilled to report another quarter of strong results capping what I think was a banner year for Hilton Worldwide. For both the quarter and the year we exceeded our adjusted EBITDA guidance, we also remained very optimistic on the fundamentals and macro setup for 2015 which I’ll cover a little later in my remarks.
We ended the full year exceeding the high end of our RevPAR guidance growing 7.1% system-wide on a currency neutral basis. In the fourth quarter system-wide comp RevPAR increased 6.6% on a currency neutral basis and was led by Europe and the U.S.
with quarterly system-wide RevPAR growth of 6.9% and 6.8% respectively in those regions. Much like last quarter we continue to see strong and balanced growth in both transient and group demand.
This has provided the foundation for solid rate growth, but we’ve also continued to capture increased volume by driving demand particularly leisure demand into non-peak periods. Transient revenue grew nearly 7% at comp system-wide hotels in the quarter driven by bar and corporate negotiated growth of over 9% and 8% respectively.
Government continued to strengthen in the quarter up 7% for the full year transient revenue also grew 7%. Group revenue growth was also strong up over 8% versus prior year in the fourth quarter and up nearly 7% for the full year in the Americas owned and managed hotels.
We remain very positive on group business going forward. In the Americas owned and managed our group revenue position is up in the mid-single digits for 2015.
Strengthening group is reflected in our strong, F&B performance with F&B revenue growing over 8% at our Americas owned and managed hotels in the quarter and nearly 8% for the year this continues to be driven by the rebounding group business and a more favorable group mix. For the year we saw a strong margin growth with system wide margins increasing a 190 basis points driving adjusted EBITDA growth of 13.5% to $2.508 billion.
Our adjusted EBITDA for the quarter was $668 million an increase of approximately 11% from the fourth quarter of 2013 and as I noted earlier both the quarter and the full year came in above the high end of our guidance. Turning to development, we maintained our leadership position in key categories according to Smith Travel Research including global rooms under construction, pipeline size and system-wide rooms.
We continue to lead the industry in net unit growth excluding portfolio acquisitions. In 2014, we added more than 40,000 gross rooms and 36,000 net rooms in 28 countries and territories contributing to 6% net growth in our managed and franchise segment.
Our 12 distinct brands across 4300 properties and 715,000 rooms driving industry leading average global RevPAR index premium of 15%. These leading premiums drive superior returns for our owners and that in turn drives greater investment and faster unit growth.
And by strategically deploying our brands globally we believe that we have the capacity to grow faster in every major region of the world which our recent performance would clearly support. Also important to note is that our leading net unit growth requires diminimous amounts of our capital, our entire pipeline of nearly 230,000 rooms requires approximately $100 million in contract acquisition cost in 5% of deals.
Our rooms under construction globally make up almost 19% of the industries total rooms under construction which is more than four times our current share of open rooms. Our pipeline increased by approximately 35,000 rooms or 17% in 2014 and includes more than 1350 hotels and nearly 230,000 rooms in 79 countries and territories.
More than half of the rooms in our pipeline are already under construction and all are in our capital light management and franchise segment. Including all agreements approved but not yet signed our pipeline totals approximately 245,000 guest rooms, again outpacing all other hospitality companies.
In 2014, we approved more than 500 deals representing more than 82,000 rooms with no portfolio acquisitions or major investments. That is more than double our gross openings for the year.
In the Americas, we signed on average more than one deal per day increasing our U.S. pipeline by nearly 30% to 100,000 total rooms.
We also celebrated a number of development milestones in 2014. We welcomed our 2000 Hampton to the system, arguably the best brand in hospitality measured by RevPAR index performance in both guest and owner satisfaction, Hampton continues to distance itself from the competition.
There are over 400 Hamptons in the pipeline and our recently announced partnership with Plateno hotels is expected to have hundreds of Hamptons in China over the next few years. Doubletree by Hilton continues to be one of the fastest growing upscale brands in the industry opening its 400th property in 2014.
The brand has more than doubled in size since 2007 even after we removed nearly 10% of the brand to improve overall quality. We took a largely American brand and have strategically deployed it across six continents.
We now have 54 Doubletree’s in Europe and 37 in Asia all where we previously had none. We have an additional 159 Doubletree’s in the pipeline globally with nearly 80% outside of the U.S.
and it’s RevPAR index has increased over 700 basis points since 2007. Home2 Suites by Hilton continues to gain momentum as owners and guests love it value proposition since its launch in 2009, 45 Home2 Suites have opened with another 165 hotels in the pipeline.
In fact we signed nearly 100 Home2s in 2014 alone. We successfully launched two new brands in 2014, both with a large base of signed deals.
Curio, a collection by Hilton includes hotels that retain their unique identity by also deliver the many benefits of Hilton system. Curio, currently has 5 hotels open with 23 in the pipeline that would sign letters of intent.
Canopy by Hilton debuted only four months ago and is redefining the lifestyle segment by creating a more accessible lifestyle brand. Canopy currently has 15 hotels in the pipeline or with signed letters of intent and we expect to open the first Canopy within a year.
On the values enhancement front late last year, we announced an agreement to sell the Waldorf Astoria New York for $1.95 billion subject to a 100 year management agreement with the buyer Anbang Insurance. As part of the transaction, Anbang also agreed to complete a major renovation to restore the Waldorf to its historic grandeur.
We are very pleased to have completed this sale and as of yesterday we have closed on all five previously announced acquisitions as part of the 1031 exchange for a total of $1.76 billion. In order to identify the properties for the 1031 exchange we conducted a very thorough process beginning before we announced the Waldorf transaction, we screened for high-quality urban and resort assets in very strong growth markets that complement our existing portfolio with the objective of maximizing long term value.
Adding the Hilton Bonnet Creek, the Waldorf Astoria Orlando, The Reach and Casa Marina Waldorf Astoria resorts in Key West and the Parc 55 in San Francisco will expand our portfolio of owned hotel in Florida Resort markets and San Francisco a key growth market. The Parc 55 which represents over a third of the purchase portfolio by a number of rooms will be a new addition to the Hilton hotels and resorts brand.
We expect that these hotels will not require any meaningful incremental CapEx in the near term. In the end we sold the Waldorf Astoria New York at a premium multiple and we have acquired great institutional quality assets in key urban and resort markets at a blended multiple below our current trading multiple have executed the purchases very quickly and as a result have captured a very significant EBTIDA and value arbitrage.
Now, let me update you on our outlook for the year. On the heels of better than expected performance in 2014 we expect continued strong fundamentals to drive another great year in 2015 particularly in the U.S.
where GDP growth forecast were recently revised upward. We think this bodes especially well for our portfolio given that 78% of our adjusted EBITDA comes from the U.S.
market. The year is off to a good start and while there has been some disruption due to the weather, we still expect to have a strong first quarter.
For the year we expect mid to high single digit RevPAR growth in the U.S. supported largely by a strengthening economy, a gradually improving labor market, rising corporate profits combined with below average supply growth.
We expect strength in San Francisco, Florida, Chicago and Boston continued recovery in Washington DC and ongoing challenges in New York. For the Americas region outside the U.S.
we anticipate mid single digit RevPAR growth for the full year given strength in Mexico and Ecuador tempered by some softness in Colombia, Argentina and Brazil. We expect performance in Europe to remain generally stable with RevPAR growth in the mid single digits for 2015, our guidance assumes solid fundamentals in the Western and Southern regions boosted by strong group business.
Continuing uncertainty in Russia and the Ukraine however will likely pressure performance in the east while France remains soft. The Middle East and Africa region continues to recover nicely with improving economic growth likely to drive mid to high single digit RevPAR growth for 2015.
Egypt in particular is showing great momentum with some headwinds on the Arabian Peninsula from less Russian inbound demand. Finally in Asia Pacific, we remain optimistic due in part to strengthen Japan and India and a positive momentum in Thailand.
In China we expect relatively strong RevPAR in the 6% to 8% range and overall regional RevPAR growth in the high single digits for 2015. Overall our anticipated growth rates for 2015 around the world are largely stable to increasing compared to last year, that leads us to be optimistic about the year expecting a system wide RevPAR increase of 5% to 7%, about two-thirds of that driven by rate.
We continue to expect net unit growth of 40,000 to 45,000 rooms for the year or 6% to 7% increase in management franchise rooms. Our adjusted EBITDA guidance for 2015 is $2.79 billion to $2.87 billion reflecting the sale of the Waldorf Astoria New York, the subsequent completion of the 1031 exchanges and changes to our adjusted EBITDA presentation which Kevin will cover in more detail shortly.
In summary, we feel great about performance in the fourth quarter and for the full year 2014, and also feel great about the setup for this year in addition to strong industry fundamentals. Our company’s specific attributes including large scale and unmatched geographic and price point diversity that create a loyalty effect should continue to drive market share premiums as well as topline, bottomline and net unit growth outperformance.
With that, I’m happy to turn the call over to Kevin to cover things in a little bit more detail.
Kevin Jacobs
Thanks, Chris, and good morning everyone. As Chris mentioned we are very pleased with our results for the fourth quarter which meet our expectations.
In the quarter system-wide comparable RevPAR increased 6.6% on a currency neutral basis driven by 3.1% increase in average rate and a 2.3 percentage point increase in occupancy to 71%. On an actual dollar basis, system-wide RevPAR increased to 5.3% in the quarter.
Diluted earnings per share adjusted for special items totaled $0.17, an increase of $0.06 over the fourth quarter of 2013, driving by higher operating income and lower interest expense partially offset by higher income tax expense. Total management franchise fees were $383 million in the quarter, an increase of 15% over the fourth quarter of 2013 driven by both topline and net unit growth.
Total fee growth was over 15% for the year, exceeding our guidance. We continue to see strong growth in our base, incentive management and franchise fees which increased 11%, 20%, and 17% respectively for the year.
As new hotels enter our system at published franchise rates that average 5.4% and existing hotels re-license or change owners and step up to those published rates, our effective franchise rate continues to increase growing 10 basis points for the year to 2.65%. There are ownership segment, adjusted EBITDA for the quarter was $269 million, an increase of 6%.
For the year, adjusted EBITDA was approximately $1 billion, and when adjusted for a non-comp increase in affiliate fees and a onetime gain, one time gain on a least we were bought out of in the first quarter of last year with 10% higher year-over-year. Operating margin growth at Americas owned and managed hotels grew nearly 150 basis points for the year.
Our timeshare adjusted EBITDA of $102 million in the quarter was 11% higher than prior year. This was primarily driven by higher third party sales and commissions including a successful start to sales at the fee for service Grand Island [indiscernible] Hilton Hawaiian Village.
Lower SM G&A expense, higher transient rental and improved club margins, early registration of New York time share units benefited the fourth quarter by approximately $12 million in adjusted EBITDA which we expect to reduce first quarter 2015 adjusted EBITDA by the same amount. We continue to gain great traction in transitioning our time share business to a capitalized business with 66% of intervals sold in the quarter developed by third parties.
Our inventory includes over 130,000 intervals or about six years of inventory at our current sales pace, 82% of which is capital light. Over 60% of our time share sales are now from new rather than existing time share owners essentially the inverse of our competitors which should drive strong, more sustained system growth over time.
Finally our corporate and other segment was $293 million for the year on the low end of our guidance of 3% to 5% increase. Growth across all regions supported favorable results in the quarter.
Strength in the Americas continued as expected especially in the U.S. RevPAR increased 6.8% in the quarter with the rate gains accounting for just over half of that growth.
Results were driven by both continued strong transient demand as well as accelerating growth in group revenue at our full service hotels, as expected calendar shift somewhat tempered growth in November. RevPAR our U.S.
owned and managed properties rose 7.3% in the quarter due to robust group performance in the San Francisco Chicago and Los Angeles markets where group revenue increased between 15% and 25%. Our Hawaiian properties has also benefited from strong group business posting over RevPAR growth in the quarter.
While our hotels in the east benefited from strength in Florida and Boston, solid momentum also continued in DC given particularly strong transient business. In the Americas outside the U.S.
RevPAR grow at solid 6.5% for the quarter as transient strength drove meaningful ADR increases in Brazil, Argentina and Colombia offsetting softness in Porto Rico as a weak group business weighed on rates in the market. Moving into Europe, a gradual recovery led to regional results that were modestly better than the third quarter.
RevPAR grew 6.9% in the quarter driven by a 330 basis points rise in occupancy and a 2.2% rise in rate. Additionally, growth accelerated versus the regions 5.7% average RevPAR increase over the prior three quarters.
Results were boosted by a especially strong group business in the U.K. and Rome coupled with steady fundamentals in Germany, but we’re somewhat hindered by persisting challenges in Eastern Europe were declines in Israel and Russia offset strong performance in Turkey.
Ongoing economic issue in France pressured fundamentals resulting in continued softness there. Sustained improvement in the Middle East coupled with easy comparisons offset softness in Africa, and resulted in strong RevPAR growth of 6.7% in our Middle East and Africa region in the quarter, meaningfully, ahead of the 3.6% average increase over the prior three quarters.
Growth was entirely occupancy driven and largely supported by a robust performance in Egypt which benefited from large group volume and easing comparisons and mitigate the effective weakness in Arabia and Pennsylvania, which suffered from a slowdown in Russian demand. Increased competition hurt fundamentals in Saudi Arabia, while Ebola related travel restriction adversely impacted our hotels in Africa.
In the quarter RevPAR in the Asia-Pacific region grew 2.9% partially driven by lower group business in Mainland, China which posted 2.8% RevPAR growth. Full year RevPAR growth in China remains strong at nearly 6%.
Fundamentals in Japan remain solid with RevPAR of roughly 8% in the quarter and in Australia as well with RevPAR gains in the mid single digits benefiting from the G20 Conference in Brisbane. Southeast Asia continue to struggle with high resort fail short of expectations offsetting encouraging signs in Bangkok where demand finish ahead of expectations over the vested period.
Turning to our balance sheet, we ended the quarter with total cash and cash equivalents of $768 million of which $202 million is restricted. Asset closing of the Waldorf sale and the 1031 exchange acquisitions, we fully repay the $525 million mortgage of the Waldorf and assume $450 million mortgage on the Bonnet Creek Resort reducing leverage by about $75 million in the process.
We continue to use substantially all of our free cash flow to repay debt and in turn, build equity value for our shareholders. In the quarter, we made voluntary prepayment of $300 million on our term loan which brought our total voluntary debt prepayments to $ billion year, and our overall net debt to adjusted EBITDA ratio to 4.2 times.
Our leverage target continues to be 3 to 4 times net debt to adjusted EBITDA. With our expected EBITDA growth in 2015 including an incremental contributions from the completed 1031 exchange, and anticipated voluntary debt prepayments of $800 million to $1 billion.
We expect to be within our target range during the second half of the year. At that point, we will explore returning capital to the shareholders most likely starting with the introduction of a dividend.
Before we get into our outlook for 2015, I want to take a minute to discuss the impact of the strengthening dollar on our results. Over 80% of our full year 2014 adjusted EBITDA is in U.S.
dollar or currencies peg to the dollar. Other than hedging certain of our unit company exposures that is not our policy to actively to hedge our cash flow.
Our FX exposure is somewhat offset by in region overhead in CapEx, but given the recent sharp movements of the U.S. dollar against the euro, Australian dollar and yen, we’re expecting $35 million to $45 million of FX impact to our adjusted EBITDA outlook and have built in to our 2015 guidance.
Turning to that guidance, as Chris mentioned our system-wide RevPAR guidance is between 5% and 7% on a comparable currency neutral basis. Ownership segment RevPAR is expected to be between 4% and 6% on the same basis.
To facilitate comparison with our competitors we will revising our presentation of adjusted EBITDA going forward to add back all non-cash share based compensation expanse. All of the guidance that I will walk through in a moment is based on the revised adjusted EBITDA presentation as well as the completion of all 1031 exchange transactions including the approximately $100 million of remaining Waldorf sale proceeds with which we intend to purchase one or more additional U.S.
based strategic assets within the next six months. With that, we are expecting an adjusted EBITDA range of between $2.79 billion and $2.87 billion for 2015.
We expect diluted EPS adjusted for special items to be between $0.78 and $0.83 for the full year. We expect management franchisee growth of 11% to 13%.
We expect time share EBITDA of between $335 million and $350 million. And for the corporate and other segment to be roughly flat for 2015.
CapEx spending excluding time share inventory is expected to total approximately $350 million to $400 million including about $265 million to $285 million in hotel CapEx which represents roughly 6% of ownership revenue. For the first quarter of 2015 we expect system-wide RevPAR to increase between 5% and 7% on a comparable currency neutral basis driving management and franchisee growth of 11% to 13%.
We expect first quarter adjusted EBITDA of between $555 million and $575 million and diluted EPS adjusted for special items of $0.10 to $0.12. Further detail on our fourth quarter results and updated guidance can be found in the earnings release we distributed earlier this morning.
This completes our prepared remarks and we’re now interested in answer any questions you may have. So that we may speak to as many of you possible, we ask that you limit yourself to one question and one follow-up.
Sally [ph] could we have our first question please?
Operator
[Operator Instructions] Your first question comes from the line of Carlo Santarelli with Deutsche Bank. Your line is open.
Carlo Santarelli
Hi, guys. Thank you for taking question.
Just doubling back Kevin to your comments on Europe, obviously the results in the quarter plus almost 7% on RevPAR basis were impressive. Are you guys and I know you call that a little bit pockets for 2015 where you’re expecting strengthen and some softness, nut as you think about in the quarter, could you kind of identify maybe where some of that strength came from.
And then, in addition as you think about your guidance for next year in the FX headwinds which you’ve quantified, have you guys thought at all about the impact of the dollar appreciation and inbound travel to the U.S on any specific markets?
Kevin Jacobs
Yes. Sure, Carlo.
On Europe I think you’re asking about the outlook and I think we expect to continue to see strength where we’ve seen it. In Western Europe, a little bit in Southern Europe tempered by discontinued difficulties in Eastern Europe and certain market like France.
But generally speaking, we think the trends in Europe are positive and we’ll continue in that direction which is reflected in our guidance. On the FX side we have – we continue to think about FX as I mentioned historically we’ve not hedge our cash flow exposure.
Those remains a relatively small portion of the business than although $35 million to $45 million is more than we’ve seen in the last couple of years for FX, given what I would view is relatively sharp movements recently in the dollar versus other currencies. We’ll continue to look at that.
And if expectations are such that that trend is going to continue to be that strong, we might change course, but historically we haven’t viewed it to be our job to bid on currency movement. And then in terms of impact to major markets in the U.S.
so far we’ve not seen really any impact at all.
Carlo Santarelli
Great. Thank you.
And then just quickly if I could. As you guys do think about, I know, Kevin mentioned, the second half, the institution of dividend, when you try and think about the investment grade rating and you think about the various uses of capital, what kind leads you to the conclusion that dividend would be your preferred means of capital return at this stage?
Chris Nassetta
Carlo, it’s Chris. I think as Kevin said in their prepared comments, where we think we would start, I don’t think we view certainly intermediate or longer term that it is the only way that we should return capital.
We are committed to our leverage goals of being three to four times and I think we’ve been pretty consistent about that and consistent that when we get there. We think that that is the strength of balance sheet that gives us all the optionality that we need and get time and bad in it.
Once we get to that point, we didn’t want to overcook the balance sheet and we’d be looking to start to return capital. And we’d be looking to do that initially with the institution of a dividend and to get in sync with our competitive set and then to the extent that we had excess cash flow beyond that and within the constraints of being at our targeted leverage levels, we would look to other forms of return on capital.
I think in today’s world that would – it look like a stock buyback, but I think at the time we actually instituted obviously we’re going to get as good a sense for the marketplace as we can as to what people are looking for as shareholders to return the excess cash flow of the company to the owners of the company. But I think the first step I think we always thought is to get synced up with having a modest dividend, because our competitive set does and our sense is it would be good to open to another base of investors in the sense of getting yield investors and to be synced with our competitive set as we talk to investors out there.
Carlo Santarelli
Understood. Thanks, Chris.
Operator
Your next question comes from the line of Harry Curtis with Nomura. Your line is open.
Harry Curtis
Hey, good morning, guys.
Chris Nassetta
Good morning. Harry.
Harry Curtis
Chris, a question that we seem to get more often than not is your view on the lodging cycle. There is some view that it will be over within the next year or two.
Just generally can you give us your thoughts on how this cycle might be different than prior cycles?
Chris Nassetta
Harry, I sort of remained very optimistic about where we are in the cycle sort of mid cycle and not to over simplify, but it’s sort of driven by the laws of economics. I think using the U.S.
as a surrogate, because it is nearly 80% of our business. What we see in this market, we see broadly around the world, as I said, its either stable or getting better.
And we see in the U.S. market a demand equation that’s getting modestly better as broader economic growth is getting better, which we think is going to continue to drive very strong trends in results.
Group business is coming back as we’ve seen and reported both last year and as we look at position in pace coming into this year. So we think driven by broader economic growth demand, demand is growing and it is still being matched by historically low levels of supply, 2.5% is the 30-year average.
Last year it was 1%, looks like this it will be a bit over that, but still far below the 30-year averages in a market condition where demand is growing modestly. That leads us to be quite optimistic about the next several years.
One of those things has to change materially for us to be less optimistic and I at least don’t see that in the horizon over the short to intermediate terms. So we feel good about it and the results that we delivered last year, sort of the setup we see in real time in the business happening today in pace and position going forward, all generally support that.
So, again, just driven by basic economic, we feel very optimistic.
Harry Curtis
Excellent, and then second question. Going back to your comments about the dividend but in a bigger topic which is value creation strategies, on the dividend are there any moves that you can make with respect to corporate structure that make sense at some point in the next year or two that would create incremental value?
Chris Nassetta
Be more specific.
Harry Curtis
REIT’s spinoff?
Chris Nassetta
That’s what I thought you were asking. But I just wanted to make sure.
Harry Curtis
I was too subtle, sorry?
Chris Nassetta
Yes. Now I know.
We certainly have been asked that a few times and talked about it, including on most of our earnings calls. And I think our view is the same which is we are constantly looking at the real estate obviously to maximize the value like we’ve done with the number of our big value enhancements opportunities most recently the Waldorf creating a huge value arbitrage.
And we look at the bulk of the remaining real estate to think about how we maximize that in terms of operations, value enhancement, ROI opportunities, but also is there an opportunity structurally to sort of separate the businesses in a way that would create value. With the underlying sort of emphasis, it’s an obvious statement, but we’re saying that it’s all about maximizing value and creating value, so that is how we look at it.
When we look at it including recently and we look at sort of a tax efficient way of doing its likely throughout structured transaction of a separation of the business which then starts to, in the analysis, require you looking at a market basket of multiples in the opco/propco world. When we look that, while there’s been a little bit more separation over the last three or four months, reality is when you look at a market basket, there is not enough separation relative to the incremental cost – onetime cost of doing it and incremental cost of having two entities or enterprises versus one where on paper, we think that there’s a significant value arbitrage.
We are not resistant to the idea I think to the contrary. We are really driven just by the ultimate value arbitrage.
We don’t see it at the moment as being meaningful arbitrage to the extent that we – if that changes, we will be the first be interested in pursuing the option.
Harry Curtis
Okay. Thanks, Chris.
Chris Nassetta
Yes.
Operator
Your next question comes from the line of Joel Simkins with Credit Suisse. Your line is open.
Joel Simkins
Hey, good morning, guys. I have to ask the obligatory time share question.
Obviously your business is striving, you looks like you’re going to be the only major lodging company with a captive time share business. And Chris, what you’re thoughts on that business and at some point would you also contemplate a spin there?
Chris Nassetta
Well, I knew we would get that question, and it’s a totally fair question given what others have been doing. I’d say again, I’d start comment by saying, our objective and job is to maximize value.
So to the extent there are things that we should be thinking about structurally from the standpoint of the engineering of the company if you will that would create more value, assume that we’re going to be looking at those things, real estate time share or any segment of the business. Having said that and you sort of implied it, Joel, in your question.
We think our time share is different. I know everybody would say they are different.
But we think it is different and special in the sense that we set out a course four years ago to really transform that business and get out of the capital intense part of it and make it much more like the management and franchise business which is such a profitable high margin business. And we have had tremendous success if you look at the numbers, the majority of the sales now are in the capital light segment.
The amount of capital that were absorbed, that were consuming that businesses is a fraction of what it’s been and going down. We’ve grown our inventory by 60% in the last year.
We now six years of inventory, Kevin covered it over 80% of which is capital light, which I think gives you a sense of where the business is going in terms of consuming capital and overall returns as the capital need goes down. And importantly it’s our most loyal customer in a sense of not just being loyal, they love our time share business, but they are very active supporter of the hotel side of the business spending a huge amount of money in the hotel side of the business.
So for all those reasons, we like the time share business, because I think our business is different and we’ve done I think a good job of transforming into something that looks and feels a lot like the rest of the business and we think should have a value that looks and feels more like the rest of the business. But in the end we are all about creating value and so we are – that’s the view.
We’re committed to the time share business, but we’re also always have our eyes open and always trying to be thoughtful about any opportunities we have to continue to create more value for shareholders.
Joel Simkins
Sure. And one quick follow-up, obviously your domestic pipeline continues to be strong.
You have some lot of competitors out there. You have some people trying to play catch-up.
As we get little bit deeper into cycle and there’s incremental competition for franchising deals. Are you seeing some of the terms struck out there change?
And does that have – would that require you guys to commit some capital to any future deals?
Chris Nassetta
Not really, and not materially. I mean, I think again this sort of self-promotional for the company, but it happens to be true, I think the strength of our brands speaks for itself.
Average market share of 115%, most of what’s getting done in the U.S. is in the limited service pace.
We have pretty much either at the top or category killer brands in terms of market share. And you’re entering into multi-decade sort of agreements with people and I think they care deeply about what that ultimate performance is going to be.
And I think that’s the reason why we are getting a disproportionate share of the development in the U.S. because of the strengths of those brands.
We do occasionally, obviously do the supplement for important strategic deals with key money mostly very rarely another else. I haven’t seen any dramatic pattern either way.
I think probably the best sort of best news or harbinger of things to come is we've actually been successfully been moving our average franchise rates up. So if you really get down, most of what’s getting done in the U.S.
almost everything getting done in U.S. is limited service and its franchise, our pricing power has been growing, not shrinking in terms of what we actually able to charge owners and get them.
They continue want to sign up with us and build our hotels because of the strength of those brands. So sure, long-winded -- short-winded way of saying what I just said is, we haven’t seen any – we’re still having great success in the U.S.
I haven’t seen any real material difference. We signed as I’ve said on average one deal a day last year.
So we’ve got good momentum coming in the 2015.
Joel Simkins
Thank you.
Operator
Your next question comes from the line of Robin Farley with UBS. Your line is open.
Robin Farley
Great. Thanks.
Two questions. First, can you give a little color on your China RevPAR guidance for next year is up 6% to 8%?
I don’t know what it was in Q4 specifically, I mean, it’s in the Asia [ph] category. But if you could give a little color on that specially and then I guess what would be driving the acceleration in 2015 in your view, because I don’t know that sort of the genera view of the economy there is looking for acceleration?
Chris Nassetta
Yes. For the full -- that’s good question, Robin.
For the fourth quarter for a bunch of sort of hotels specific reasons we were in the 3% range. In China for the full year we were sort of six, six plus.
We think it’s sort of in that range, again this year on a comp basis and has a lot to deal with sort of where our hotels are both sort of diversity of the market as well as the individual locations in those markets. We’ve had a good – I mean, China is obviously seen some slowdown in broader economic growth.
It’s still one of the highest growing markets in the mid to high single-digit in the world and while, we have seen RevPAR growth rates temper over the last two or three years. We are still managing to drive pretty healthy growth and we think we will.
The other thing that sort of happening in China which is nice to see early days is as you starting to the food and beverage side is up a little bit. So we’re watching that very carefully with a lot of what’s being going on there, sort of government posterity setting the tone for the broader market.
You’ve seen ancillary spend really impacted over the last couple of years. As I talk to our teams in China, real time talk to our team over there every week.
It feels like – they feel that they are at the beginning of a little bit of a recovery, the purse strings are loosening up a little bit more in the ancillary spend area. So I think China, I think a good story I think from a growth point of view, continue to make really good progress.
We signed more deal with the China in 2014 than we did in 2013. Now the complexion of those deals was different.
It was a much heavier component of limited service, which is what we have been sort of planning on and driving towards, because we think that we’re going to get broad distribution. So, we feel good about the China story, but the specific answer, is it relates to individual assets and markets and locations, but we feel confident in that range.
Robin Farley
Great. Thanks.
And then my other question was, your incentive fee growth, I guess what's embedded in the total fee guidance for 2015, is that 11% to 13%? Because with incentive fees, its look like they were up really strongly in Q4 and is that something that we should see it for moving here later into the cycle that we would see accelerating?
Chris Nassetta
Yes, Rob. I think that we have a couple of one-time items that affected both 2014 and that are going to affect 2015.
But if you unpack that really for both years it’s kind of high teens growth rate, and that is something that as we’ve discussed in the past, as we open up more managed deals outside the U.S. that are internationally format with IMF that’s based on percentage of GLP versus the more standard U.S.
format which is based on clearing and owners prior to return hurdle, you should see that growth rate accelerate, but if you unpack again the onetime items, the growth rate is relatively – is basically the similar for 2014 to 2015.
Robin Farley
And was there a big change then in the U.S. hotels paying incentive fees, that what percent at this point?
Chris Nassetta
It broadly moved up into the high 50s from sort of the low 50s and we expect contribution rate to go from the high 50s to the low to mid 60s in 2015.
Robin Farley
Okay. Great.
Thank you.
Operator
Your next question comes from the line of Thomas Allen with Morgan Stanley. Your line is open.
Thomas Allen
Hey, good morning guys. Thanks for the color on the regional RevPAR expectations for 2015.
But just focused on the U.S., a big debate in the market is just related to the performance of kind of the higher tier hotels versus the mid tier versus the lower tier hotels. You obviously have a good mix among the chain scales.
Could you just give us your expectations of 2015 of chain scale performance? Thanks.
Chris Nassetta
Yes. Thomas, thanks for the question.
I know, we’ve been answering that lot. I’m going to maybe oversimplify, but I think it will get to the answer you’re for.
We look at last year obviously, I’d sort of break it down to for upscale and above and mid scale and below, because I think that broadly is sort of where you’ve seen performance differentials. Last year, the lower end of the business under performed.
If we look at our – if we blend that all together by about a 100 basis points the outperformed, the lower end outperformed the upper end by about 100 basis points. And that was on the sort of back of very strong transient growth.
If we look at what we expect, both what we’re seeing this year. What we see in our group booking pace.
What we see in the patterns on the upper upscale and above, we think that converges this year and is roughly equal when we actually blend that together. And that is because we expect continuing transient strength, but in the upper end of the hotels you’re now going to start to get more of the benefit of that group base, which is not only giving you more volume and then higher rated groups, but its giving you more leverage to leverage the better transient business, because you filled the big block of rooms with group and more so than last year.
And I would expect as I’ve seen pretty much in very cycle, I don’t think this cycle is different in that regard. As you get beyond this year, I would think it will flip around.
I think you’ll have the higher into the business outperform. But this year our best numbers are saying a consistent level of performance between the average of those two big segments.
Thomas Allen
Okay. And then just on your – the five assets you recently bought.
I thought it was interesting that you bought two hotels in Orlando and you’ve been kind of shifting exposure away from the New York market. Can you just give some more color on kind of your expectations A, around Orlando, and the strength of that market, then also on New York?
And then just an update on your relative exposure now that you sold the Waldorf and you bought those other assets? Thanks.
Chris Nassetta
Yes. I will take the last one first.
Our relative exposure in New York going from 8% to little less than 5% on New York centric in terms of EBITDA contribution. In terms of the assets, I would say broadly, first of all, in Orlando its really one asset, I mean, we talked about it as the Waldorf and the Hilton, but if you’ve ever seen it its two towers connected by the meeting space that was built as one complex.
It’s an amazing complex. We’ve been obviously involved from the beginning of it in a great location adjacent to Disney that has been building and building in terms of moment of the group business and being able to leverage off for that.
For leisure business given its location, and we have very high expectations of the performance of that asset in that location in Orlando Key West, the two assets, again, sort of run as one asset, it’s probably in the U.S One of the hardest to duplicate locations that like you can pop up hotels in Key West. There's a pretty limited amount of land.
And we feel very good about not just short term but long term value and performance on that. And then San Francisco I think everybody is pretty up to speed on San Francisco.
A great asset – essentially adjacent to our existing Hilton. We can run it as basically one big hotel.
We can Garner efficiencies out of both sides. We can drive by bringing in the Hilton system.
We can drive incremental market share and what is one of the strongest growth markets in the country. When you blended all together, the way I would look at it is, short intermediate term, the growth rate from a RevPAR and even a point of view is probably about double what we existed.
Forgetting even the multiple arbitrage, the RevPAR growth rates on average will be in the very high sort of high single digits and the EBITDA will be in the double-digit and both of those will be meaningfully higher than what we would have experience with the prior asset.
Thomas Allen
Very helpful. Thank you.
Operator Your next question comes from the line of Joe Greff with JP Morgan. Your line is open.
Joe Greff
Good morning, everybody. What continue to surprise us, nicely surprise us to the upside is the level of occupancy gains that you finished on a system-wide basis in the Americas, little bit north of 75% system-wide just below that, I’m presuming that that or above your prior peak.
Maybe can you talk about what you’re doing to incent your managers to push price? Maybe that’s a different than a year or two years ago.
And when you think about your U.S. RevPAR guidance for 2015, what’s the mix there between rate and occupancy gains?
Then I’ve a quick follow-up.
Chris Nassetta
We have been I think a really good job on occupancy. We’ve finished historically high occupancies last year.
They were up to 240 basis points in occupancy. We do not think we will repeat that this year.
Although I will say, embedded in our guidance is probably 1.5 points to 2 points in occupancy, which will mean, we’ll be at yet another historical high. You might say, why and are you driving rates, sort of embedded in your question or the second part of your question is, are you doing enough on rate.
I think the answer is yes, and I think it is that not all days are created equal in our business, in most markets. Monday through Thursday we all know is a very different experience than Friday through Sunday, not everywhere but most places.
And so what we’ve really try to do with our teams in their final analysis of business is bifurcate that into being. Its supper strategic about how we’re pricing in the high demand periods, and being thoughtful about how we price in the lesser demand periods, but recognizing if we can get, fill those rooms at reasonable rate that net cash flow, the properties, the bottom line is going to be better.
So I know that all sounds easy, but it’s not and I think the short answer is one size is not fit at all. But that’s where we’re getting this occupancy gain is really a lot of leisure and a lot of weekends and some off-peak [ph] just being smarter and being more aggressive further out in time where we know we’re going to have weaker periods.
If you look at rate versus occupancy this year embedded in our number sort of we’re going from roughly 55 – roughly 55, 45 or excuse me, roughly 50-50 to 65, 35. So there’s definitely a step up.
But we want. We want weekend and off-peak occupancy.
And I do think we’ll get 150 basis points to 200 basis points. It will obviously start to tempt – sort of there’s only so much more we’ll be able to do.
It will be tempered I think as we get into next year and beyond. Did I attempt that you had a lot questions embedded.
Joe Greff
Yes. You touched on it Chris.
One follow-up I have and you may have said this before or I may have missed it in a lot of data points that you talked about, but looking at your system-wide RevPAR guidance of 5% to 7% that’s on the currency-neutral basis. If we were to look it adjusted for where the U.S.
dollar is relative to the Australian dollar and the euro, where would that be?
Chris Nassetta
It would probably be 4% to 6%, this is about a point in there probably for conversion to actual rate.
Joe Greff
Great. Thanks guys.
Chris Nassetta
Thanks Joe.
Operator
Your next question comes from the line of Felicia Hendrix with Barclays. Your line is open.
Felicia Hendrix
Hi, good morning. Thanks for taking my questions.
Chris, in your prepared remarks you said that the group revenue position was up in the mid single-digits for 2015 for the Americas. I just wondering, could you give us the rate and volume components of that?
And then also can you tell us what you’re seeing both in the quarter, for the quarter bookings, and then farther out for 2016?
Chris Nassetta
Yes. The split is 50-50, plus or minus between volume and rate on the existing group position.
And pace has been very strong. I don’t have a first quarter pace number yet, but if I look at that same comp set that I reference that’s up in the mid single digits and position, I think the pace in the fourth quarter was up over 50% -- 57% is what I recall, but very strong pace.
My impression, well, I don’t have final numbers. Honestly, January and February combined I saw some very early numbers that’s look like pace was strong, but I don’t have an exact number at the moment.
Felicia Hendrix
Okay. And then just along lines with that question, the third quarter 2015 looks like it faces pretty tough comps, maybe you don’t have this detail on front of you, but just wondering what you might be seeing in that quarter?
Chris Nassetta
Yes. It’s pretty good.
I don’t have the specific number in front me Felicia, my recollection is that first part of [indiscernible] group is a little bit weaker for us and the middle two quarters are relatively strong. So it is a harder comp, but we’ve been pretty well.
Felicia Hendrix
Okay. Great.
And then just as a quick follow-up. Just wondering, are you seeing any changes in RevPAR index in any of your major geographies or among your major brand?
Chris Nassetta
No. We generally have seen modest upward trajectory across the entire portfolio.
If we look at our full year index increase, it was about a half a point for the system which in the world we live and going up a half a point from the high levels that we’re at. We think is very strong, but generally increasing modestly across the brand portfolio, no issue of note in the sense of declines.
Felicia Hendrix
Great. Thank you so much.
Chris Nassetta
Thank you.
Operator
Your next question comes from the line of Shaun Kelley with Bank of America. Your line is open.
Shaun Kelley
Hey, good morning everyone.
Chris Nassetta
Hey, Shaun.
Shaun Kelley
I just wanted to follow-up on the owned portfolio. You said you addressed the REIT question head on.
So I’ll ask a different spin, which is I think basically since we’ve been doing these calls now you’ve started with some time share opportunities and why you some I guess clean up at the Hilton New York in terms of monetizing some opportunity in the retails frontage there. And now you’ve done Waldorf something really successful there.
Is there anything else as you kind of move your focus post-Waldorf that you kind of work on in terms of monetizing or getting a little more value of what you do own in the owned portfolio?
Chris Nassetta
Yes, of course. I touch on it quickly when I talked about sort of the broader real estate portfolio on a post-Waldorf.
I think there are some more – what I would sort of define as value and enhancement opportunities, which is more change of use type of opportunities. We’ve talked about at least to one of those another property in Hawaii where we been with the local municipality and are pretty much done with the process or close to it to convert one of the towers at the Hilton [indiscernible] to time share.
Now we have other product, we’re selling in that market. So we’re not in a rush to do it, but it will be great additional supply of product and I think a great way to maximize the value of that asset, which is a great hotel, but too big for the market in relative to air lift into that market, its always been too big.
We have a couple others that on various stages of sort of analysis in work that might be again components like at the New York Hilton of existing owned hotels where higher and better use, might be some component of time share. So I do believe we’ll talking to you about some of those over time in the coming quarters.
And then it’s a big portfolio and I don’t think we should under estimate that, because it’s what we do every day. I should let Kevin talk because he's responsible ultimately for the real estate side as well.
But ROI opportunities are not insignificant. I know they are not sexy doing the Waldorf, obviously a sexy and we’re very proud of that and excited about it, but there's lots of investment opportunities in a portfolio this large over time to make what are very modest investments that drives very, very high IRRs and so we’ve been doing a number of those.
I honestly think that we have an opportunity to do even more than we have done. So may not be – there are few more to come that are not insignificant, but adding up a bunch of the ROI stuff I think over time will help create lots of value.
Shaun Kelley
Perfect. And my follow-up question would be little bit of a different vain.
Just any sense or direction you can give us for how many of your, I guess, new hotel agreements or kind of signed franchise agreements come from existing owners versus I guess people that are new to the Hilton system or to the Hilton family?
Chris Nassetta
I think on average around the world its 75%, I think if you look at in the U.S. it’s like 90%, weak in fact, but that’s order of – sort of directional right.
It's the majority of the business and in the U.S. it’s the vast majority of the business.
Shaun Kelley
Meaning new agreements coming from existing owners?
Chris Nassetta
Yes.
Shaun Kelley
Perfect.
Chris Nassetta
Yes. In the U.S.
I think it’s like 80% and I think around – if you blending the rest of the world I think its 70%, 75% stuff like that.
Shaun Kelley
Got it. That’s really helpful.
Thank you very much.
Operator
Your next question comes from the line Steven Kent with Goldman Sachs. Your line is open.
Steven Kent
Hi. I have one quick question, which is in terms of the 6% to 7% supply growth, how much of that is select service brands and how are you balancing sort of the Hilton Garden Inn versus the Hampton Inn profile and why are certain owners picking one over the other?
Chris Nassetta
Yes. In the 6% to 7% I think implied in this roughly an even split.
If you look at what’s under construction around the world today in our 120 whatever thousand Steve, it’s about 60/40 full service and above actually, but that given the growth in the U.S. market that will sort of flip around a little bit.
So I’d say, it’s probably 50-50, or probably very close to 50-50. In terms of HEI versus Hampton it has a lot to do, almost all to do with market demand sort of drivers.
I mean, Hampton is a slightly lower price point and slightly different product in the sense of more limited services, a little bit smaller room, little bit less than the food and beverage, a little bit less all around. It’s an amazingly strong brand.
As I said I don’t think there is a stronger in the business in my opinion. But it is little bit different than Garden Inn and so it really depends on the type of demand wanting a more – a simply product where there is a little bit more need for more – a little more F&B, a little bit meeting space, a little bit figure room product I think it drives towards the Hilton Garden insight.
So it’s really just – the demand in any particular location within a market, what do we think, what would you think the price point is that will drive the economic results.
Steven Kent
Okay. Thank you.
Chris Nassetta
Thanks, Steve.
Operator
Your next question comes from the line of Bill Crow with Raymond James. Your line is open.
Bill Crow
Hey, good morning guys, one quick question and then follow-up. Hi, Chris.
As far as value creation and owned real estate is it possible that after you’ve identified all of these additional assets in the 1031 exchange process, maybe there’s an opportunity the Hilton New York or Hilton San Francisco and Towers, and exploit the global inflow of money into the U.S. looking at hotel deals to do some similar maybe obviously less dramatic fashion in the Waldorf or are asset sales beyond the Waldorf off the table?
Chris Nassetta
Nothing is ever off the table, I mean, we are always looking at the opportunity for assets sales, they have been pretty good [indiscernible] so I don’t think there’s any really material ones that make sense. I think the Waldorf, Bill, is pretty unique in the sense of that value arbitrage opportunity.
The Hilton New York is a New York asset but I don’t think it has the same qualities as the Waldorf that allowed us to do that. So, I don’t really see that there.
The other thing is, we did I think a very, very fine job and took advantage of market conditions and frankly took advantage of the fact that we were a quick all cash buyer on its supertanker kinds of assets that allowed us to drive what I would say to you is better than normal market pricing on a multiple basis. I don’t think we can do that all of the time.
So we did it for almost $2 billion and we’re able to put this together in a way we were – we think it’s an amazing complement to our profile, the existing assets that its joining great for the growth rate, et cetera. But one, I don’t think you could expect to get sort of market multiples on either the sell or the buy that would create the arbitrage that we were able to create at Waldorf.
I wish that we could say we would, but I don’t think that I would lead you down that path. I think the think bulk of the rest of the real estate, with maybe some very minor exceptions, we will think about more as the opportunity to do a structured deals and think about it as a portfolio that you would build that would have good market exposure and the right market surround the country that would – that has a standalone would be a very attractive standalone.
Bill Crow
Chris, my follow-up is that we’ve seen an uptick in incoming calls and potential M&A and maybe part of that is emanating from some of the news coming out from one of your peers, can you just talk about the challenges that you would envision for putting together a couple of brand companies and maybe what the benefits would be ultimately of M&A in this space?
Chris Nassetta
Yes. I mean, I can’t talk about it for anybody else, so I won’t.
I can talk about it from our point of view. And I think one of the things that’s very nice about where we are and I think from an investor point of view people should think as a real positive is that, as a result of what we have put together and how we’re making it work.
We’re able to do what we do, which will lead the industry in the major metrics including an importantly net unit growth as a percentage of installed base without having to go out and acquisitive. Why?
Because we have these amazing – we have these great scale, geographic distribution, price point distribution and brands that are underneath it, that have the premium market share in the industry and so. And we’re adding as a result of that base, we’re able to sort leverage off that and add brands like Curio and Canopy and maybe other thing that we can do organically, at an astronomically high yield, because the investment to add those brands is frankly diminimus as compared to going out and becoming acquisitive and thinking about inorganic growth.
So way I think about it from our point of view is where I’ve always said it, you would never say never, because that is the dumb thing for any CEO to say. If there was an opportunity that we thought that was a great strategic fit where we can create huge amounts of value, you and we would want to pursue it.
But we have not been sort of bounty hunting or particularly acquisitive, because we haven’t needed to be. We can deliver what we are trying to deliver which is outperformance across the board, but particularly on growth without having to do and we’re doing it on a much higher yield basis that going out and buying things.
Bill Crow
Great. Thank you, guys.
Operator
Your next question comes from the line of Vince Ciepiel with Cleveland Research. Your line is open.
Vince Ciepiel
Hi, guys, thanks for taking my question.
Chris Nassetta
Sure.
Vince Ciepiel
And my question relates to margin within the owned business. It has showed good progress in 2014, so first maybe how did that compared to your initial expectations and if there was a delta, what drove that?
And then secondly, with the Waldorf transaction how does that impact margins on a year-over-year basis for 2015 and how much core growth from a comp hotels are you assuming in the outlook?
Kevin Jacobs
Thanks, Vince. It’s Kevin.
I think relative to the full year for 2014 it was roughly in line with our expectations. I think in our least portfolio FX might have hit us a little bit or maybe came in a little bit lower than we thought.
And then going forward we still think we can maintain pretty good margin growth in the owned portfolio. I think as Chris mentioned before the assets that we were buying do have – we do expect to have higher growth rates on the bottom line than our existing portfolio.
So it will be some improvement. But you got to remember in the context of a $1 billion business it’s not going to move the needle all that much in terms of margins.
They will perform better if their outlook comes true, but I don’t think it will move the needle all that much on our over basis.
Vince Ciepiel
Got it. And then a quick follow-up, you mentioned FX, are you guys guiding 11% or 13% fee growth, you think about the FX headwind.
What type of headwind is it to fee growth within the business and how much of that you overcoming next year?
Kevin Jacobs
60% of what we’re putting into the guidance in the fee business and about 40% is in the rest of the business and that’s all embedded in the 11% to 13% guidance.
Vince Ciepiel
Great. Thanks.
Operator
Your next question comes from the line of Rich Hightower with Evercore ISI. Your line is open.
Rich Hightower
Hey, good morning, everyone. Thanks for taking the question here.
Just one, I was curious for a more detail on the share based comp add backs and I know that the guidance build up in the back show some detail. It does show I think a far higher amount of the add backs relative to 2014?
And if you guys could just lay out what some of the moving parts are there?
Kevin Jacobs
Yes. We can take you through Rich some of the detail Christian and Jon [ph] can take you through offline, but you’ll recall last year we had a onetime credit from the conversion of some of our programs related to the IPO, so that’s really the difference there you see between 2014 and 2015.
Rich Hightower
Okay. Thanks.
Chris Nassetta
Yes.
Operator
Your next question comes from the line of Smedes Rose with Citigroup. Your line is open.
Smedes Rose
Hi. Thanks.
I wanted to ask, you might have address this, but your RevPAR and you owned assets is the point below your system-wide outlook. Is there something specifically pulling that down or is it just surprised given your enthusiastic comments around group bookings for the year?
Chris Nassetta
Yes. Smedes, there’s really two factors.
One is in the lease state where the FX that we build into the guidance hits a little bit harder than it does in the rest of the business and then a little bit in New York and that’s it.
Smedes Rose
Okay. And then with your time share outlook, looks like it’s down year-over-year for EBITDA, is that just reflective of the kind of asset light more management fee business that you’re moving forward?
Chris Nassetta
It’s really we mentioned in the fourth quarter we have a little bit of a timing issue on revenue recognition where a little bit more came in the fourth quarter which drove our beat in the fourth quarter and we think that that comes out sort of dollar for dollar in the first quarter. There’s a little bit in there in terms of the mix as we convert to fee for service, but it’s mostly that time issue.
Smedes Rose
Okay. Great.
Thank you.
Operator
Your next question comes from the line Chad Beynon with Macquarie. Your line is open.
Chad Beynon
Hi. Thanks for taking my question.
Just a big picture one, we’ve seen some companies begin to reward travelers slight more aggressively with points and perks during the past several quarters. And recently one of your competitor is launching a free world-wide WiFi initiatives.
So I guess my question is, when you went through the corporate negotiated rates a few months ago with your partners, are corporate starting to push for more perks in the industry. So maybe if you can give some color on kind of where this is going, and if that matters at all or if it’s really just brands and location with your corporates that kind of roll that conversation?
Thanks.
Chris Nassetta
I think not to give you a short answer but I think it’s the latter that you described. I do not sense and certainly from world-wide point of view that in these corporate rate negotiations or volume negotiations we’re giving more away, frankly I think it’s becoming more of a seller’s market than a buyer’s market so I think we are doing less of that not more of that, I think some of the things that you are seeing people do on Wi-Fi has to do with sort of a different objective which is continuing desire to channel shift people in the more direct channels to lower distribution cost, I think I would view that as a good thing generally for the industry and for individual players.
Chad Beynon
Okay. Thank you.
Chris Nassetta
Yes
Operator
I would now turn the call back over to Mr. Chris Nassetta
Chris Nassetta
Well thank you everybody. We appreciate the time and attention today.
I am very pleased with everything we accomplished last year as I said it was a banner year and equally pleased with the setup and what we see so far this year and what we expect for the remainder of the year and look forward to talking to you after our first quarter to give you an update on everything. Thanks again for joining us today.
Operator
Ladies and gentlemen thank you for your participation. This concludes today's conference call.
You may now disconnect.