HLT
#I'd be happy to but we don't ---+ time does not allow for it.
Kidding aside, the rules that we're dealing with within the IRS code are called the EIK rules.
They are incredibly complex, and very difficult to come up with an easy equation for you of, they own X, they're selling Y, because it has a lot to do with how Blackstone owns the shares in the Company in the various funds that they have.
Very complex attribution rules, and even attribution on a go-forward basis has between large shareholders like HNA and Blackstone, even though they are unrelated in the attribution rules, they become related to a certain degree.
I'm not trying to be evasive.
The truth is there a lot of really smart people on our tax, and with outside advisors that have figured out how all this works, because ultimately we have to get an opinion that says that we meet the REIT qualification rules.
As we've done all of that work, again, not a simple equation because of the complexities of the attribution rules, it became apparent to us in doing the work that in order to qualify we needed to have Blackstone sell down 5.5%, and that's why we've disclosed it.
Obviously, they have until ---+ we can do the spins without that selldown, because this problem only arises as a consequence of the HNA deal, so really they have to have done this by the time the HNA deal closes, so we could do the spins and there was no EIK issue under the set up pre-HNA.
Now that the HNA deal is getting done, prior to that closing, in order to meet the REIT qualification test they would have to sell down the 5.5%.
So I know you want me to sit and give you a very simple equation.
It's just not that simple, but we are 100% confident that the work that has been done is right, and that if they sell down 5.5% prior to HNA closing, we will meet all the REIT qualification rules up front and be able to continue to meet those rules.
No ---+ it would take literally 50 pages of analysis to do this and I don't have it in my head.
It is much more complex than that, and there's no way anybody ---+ I'm not being ---+ there's no way anybody can do it, because you'd have to know the intricacies of how Blackstone holds all this and how HNA is going to hold all this.
Because the attribution rules are not entirely logical.
It is not a simple equation and, again, I'm not trying to be evasive.
It is not that simple.
The thing I think that's important for investors to know is that this fixes it.
Okay.
And that the timing of it is such that it needs to be done before the closing of HNA buying 25% of the company, and there will be no issue.
It will be solved permanently.
That's it.
That's all they need to sell.
Now, Blackstone can sell whatever ---+ it's their choice whether they want to sell more, but the contractual commitment that we have with them is that they will do this, so that we make sure that Park qualifies as a REIT.
No.
I mean, there is not much to say about that.
Obviously we just announced the deal.
We do not think that they are big regulatory challenges to get over.
And so I do not personally think that there's a great deal of risk from a regulatory point of view.
But we'll go through ---+ time will tell, we will go through the process.
No, I don't.
I think if you ---+ we attached the shareholder agreement and filed it so that if you want to, or any investor wants to, you can read ---+ I think we filed 180 pages of supporting documentation, so everything is 100% transparent.
I think if you looked at how we dealt with ---+ how they come on the Board with one HNA affiliated member, one unaffiliated independent member.
Both Board members that have to go through a vetting process with our nominating committee where we are able to say yes or no, and how those Board members can interact or participate on issues that might be in conflict with HNA's investment.
Or, in the event that there is other M&A activity that we're interested in pursuing, if you look at it very carefully, we were very thoughtful about making sure that where there might be potential for conflict, we limited their voting rights.
We limited what they can participate on in Board discussions and on the Board.
We also limited their voting rights, ultimately, on certain transactions and events to make sure that we dealt with those conflicts.
We spent months, literally, of time, on these issues.
We had a special committee of our Board that went through an incredibly rigorous process with outside advisors, both on the banking, legal side, management was very actively engaged with them, in giving our advice.
The reason it took a couple months is because we wanted to make sure we were protecting the base of other shareholders in the Company against any potential conflict so again, you can read it in detail.
I feel incredibly comfortable that we have protected against any eventuality and that we're going to be able to run the Company the way we need to run the Company, that they're going to be engaged with us in a very constructive way, and that anywhere there is a potential for conflict, vis-a-vis existing shareholders, we protected the existing shareholders including ourselves against any of those concerns.
It is, I would say largely rate.
It's a little bit of volume.
But I'd say best I can remember it's like 80/20, 80% rate, 20% volume but there is a little bit more volume.
I think by the end of this year, probably a dozen, something like that.
I can get a ---+ maybe a little bit higher.
But I'd say 10 to 20.
You know what, <UNK>.
It's a great question.
I think we're all the next generation of buyers, right.
So if you look at the breakdown in where timeshare, where we are selling timeshare, it's a pretty diverse set ---+ a pretty diverse demographic, and you got to remember that what timeshare is selling is a vacation.
It's not ---+ this is not a second home or a third home market.
This is simply selling ---+ if you're going to go on vacation once a year, you can do it and save a lot of money and have a lot more space and take your whole family and you can trade it for wherever you want to be or you can trade it for hotel rooms.
It's an incredibly flexible vacation alternative.
I think when you ---+ if you went through the sales pitch, what you'd find is that's what's compelling.
People look at it, and those people who have one or two in many cases, three or four units, are basically saying, yes, I'm going to take one or two or three weeks of vacation, and this is a very cost efficient way for me to take vacation, be able to take my family or friends, have a kitchen, have a washer, dryer and have all these things.
You've got to sort of break ---+ and I know you know this ---+ I think you have to break from ---+ the people that don't understand the business very well I think of it more as, this is sort of in lieu of a second home or whatever, and it is just not that.
So I think it's appealing to anybody that is looking to go on a vacation, and is looking for a value proposition and I think that transcends age, honestly.
No.
I'm not going to ---+ I mean, the way I think about it is we are very confident in the strategy that we're pursuing and that we've articulated which is, we're very focused on having purebred brands that are leaders in their individual segments, that have clearly defined swim lanes, that have premium market share, and as a consequence, help us drive industry-leading organic unit growth.
That's our strategy.
Others have taken different paths.
I'm not going to get into ---+ obviously we've chosen our strategy because we think it's the best strategy.
Otherwise we would change it.
I remain confident in our strategy.
I think as we continue to deliver the results that we are delivering in net unit growth, particularly in the post-spin world, I think the strategy and the success of it will speak for itself.
As for what Marriott or anybody else is doing, I'm not going to comment on it.
I think you've got to ask them if you want to talk about their strategy.
I'm sure they're going to have a call in the next couple of weeks and you can ask them about it.
We're very confident in our strategy.
You can see in terms of deal signings, starts, net unit growth, all those things that are incredibly positively impactful to our bottom line, and our story, we're continuing to pick up some pretty good momentum.
We are doing just fine.
We are picking up.
Lots of reasons for why we're gaining momentum, but I think the statistics sort of speak for themselves.
We continue to pick up some steam.
I can't ---+ it is not affecting RevPAR in a material way.
It's really hard to sort of ---+ I know others have said that it is so many basis points.
I mean, as we've studied it, I think it's really hard to say.
I think intellectually, it's hard to debate that it's not having a little bit of impact, given de-ranking and dimming that's going on within the OTA world.
But it's not so meaningful that we can really measure it in a hard way.
What I would say is, if we look at it, and we have measured it very carefully, we look at our net rate effectively, the net rate, net of distribution costs, relative of where we are now versus where we were, we're better off across the board.
Meaning that, you'd be willing to sacrifice in theory a little topline growth if the result was, you are bringing your distribution cost down and that your net rate effectively is higher.
Across every one of our categories our net rates are higher.
So there's probably some modest amount of impact built in to the last couple quarters and the next couple of quarters of RevPAR growth.
On the headline RevPAR, but on the net rate basis, on a net rate basis, we're better off because we're shifting to our lowest-cost channels, and ultimately our job is to drive better results for our owners who are investing all the capital to help us continue to drive that net unit growth we're talking about.
Our owners are incredibly supportive of what we're doing because they're benefiting from what's going on.
Here is the thing.
I think scale does matter.
I said it in my prepared comments.
And I think we have it, right.
I guess we went from the largest in the world to the second largest, post the Marriott Starwood merger but if you take our pipeline and our rooms in existing supply, we have 1.1 million rooms.
We think that gives us all the scale that we need and we certainly, if you look at the market share numbers that we're driving in each of our brands, that's partly ---+ obviously great products, great service ---+ but partly the result of the network effect that scale creates.
If you look at each of those brands, they are leading their segments in terms of market share so I think, as scientific evidence would say, scale matters and we have it, and what we are obviously trying to do is then lead into it more around the world and build more network effect in the various regions around the world where we operate.
So we feel really good about where ---+ there is no deficiency, I guess I'd say.
I think there's opportunity.
We've got enough of the network effect that I think shows up in all the numbers that I just described to be able to really take advantage of the scale, and now it is to opportunistically continue to layer brands in different locations and different chain scales in markets to just continue to strengthen that network effect.
On a regional basis, I think, honestly next year is going to look a lot like this year.
I hope it's all a step change up a little bit, but in terms of the relative performance around the world, I think it's going to look a lot like this year, which is Asia-Pacific probably leading the charge, non-US Americas, sort of doing reasonably well and comparable.
The US market being sort of in the middle of the pack, and Europe and Middle East, Africa, being a little bit lower than the midpoint because of an assumption that Europe ---+ European economy is going to continue to have anemic growth and Brexit generally, as you get closer to an actual event of the UK leaving the EU.
In terms of thea Middle East, I think it's a very small region relative to many of the others.
There's just enough sort of disruption and enough places where I think we do expect to be positive next year, but relatively modest growth there.
<UNK>, it's a good question.
I'd say there are three or four reasons for it as we've looked at it, some of which we've talked about before.
The STR data first of all is non-comp, where we are comp so you have to adjust for that.
Segment weighting, which you talked about, obviously going to have an impact.
I think a few other things, one, we're more urban in orientation than you would find on average in STR, and the urban markets, particularly because business transient was so weak, were more beat up.
We have a little bit higher average representation from the oil and gas markets, which were ---+ it's hard to believe they keep getting worse but they do, which I think hurt us.
And then there's probably, to my earlier comment, a little bit impact from the OTA situation that I talked about.
Again, we're willing to trade a little bit of headline, topline RevPAR for net RevPAR, if you will, that is higher because that drives a better result for our owners.
But my guess is, again, I can't measure it perfectly, my guess is there's certainly some modest impact in the third quarter from what's going on with the OTAs.
Yes.
Well, thanks, everybody, for the time today.
I'm glad to see this call worked out better than the last one when the AT&T trunk line shut down on us.
We got to do in one shot instead of two.
We appreciate the time, really look forward to getting together with as many as can join us in New York on December 8 at the Conrad in New York downtown.
We'll have all the management teams there, and I look forward to walking you through all three companies in a great deal of detail.
So we'll see you then, and thanks again for the time today.
