Ladies and gentlemen, thank you for standing by. Welcome to Choice Hotels International Second Quarter 2023 Earnings Call. At this time, all lines are in a listen-only mode. I will now turn the conference over to Allie Summers, Investor Relations, Senior Director for Choice Hotels.

Good morning, and thank you for joining us today. Before we begin, we'd like to remind you that during this conference call, certain predictive or forward-looking statements will be used to assist you in understanding the company and its results. Actual results may differ materially from those indicated in forward-looking statements and use to consult the company's Forms 10-Q, 10-K and other SEC filings for information about important risk factors affecting the company that you should consider. These forward-looking statements speak as of today's date and we undertake no obligation to publicly update them to reflect subsequent events or circumstances. You can find a reconciliation of our non-GAAP financial measures referred to in our remarks as part of our second quarter 2023 earnings press release, which is posted on our website at choicehotel.com under the Investor Relations section. This morning, Pat Pacious, our President and Chief Executive Officer; and Dom Dragisich, our Chief Financial Officer, will speak to our second quarter operating results and financial performance. Following Pat and Dom's remarks, we'll be glad to take your questions. And with that, I'll turn the call over to Pat.

Thank you, Allie, and good morning, everyone. [Technical Difficulty] I'm pleased to report that Choice Hotels once again generated impressive earnings, fueled by our best-in-class hotel conversion capability, and our exceptional success in rapidly integrating Radisson Americas ahead of schedule. At the same time, J.D. Power ranked two of our fastest growing brands, number one in guest satisfaction, Cambria hotels in the upscale segment and WoodSpring Suites in the economy extended stay segment. Our strong performance and the velocity at which we are executing have enabled us to further invest in our business to drive significant, long-term earnings growth and return a meaningful amount of capital to our shareholders. Let me start with the momentum we have created in our adjusted EBITDA growth. Our distinct growth strategy and best-in-class franchising business engine drove our second quarter 2023 adjusted EBITDA to $153 million, which was 18% higher than the prior year and marked a new quarterly record. Fueling our success is our commitment to strengthening the value proposition we provide to our franchise owners, allowing us to convert independent and competitive brands to our flags while growing our effective royalty rate, which increased by 6 basis points for the first six months of 2023 year-over-year. We expect to carry this strong momentum through the rest of 2023, as we grow our franchise business with hotels that generate higher royalties per unit, while leveraging the stronger business delivery engine we have built to improve the profitability of each franchise. What gives us even more optimism is the significant scale driven platform and ancillary revenue growth opportunities, we expect to realize from the integration of the Radisson Americas brands. This acquisition has created a step function change in the size of our business, expanded our loyalty program, extended our co-brand credit card opportunity…

Thanks, Pat, and good morning, everyone. Today, I'd like to provide additional insights on our impressive second quarter results, update you on our balance sheet and capital allocation approach and share expectations for what lies ahead. Throughout my remarks today, I would like to note that all figures are inclusive of the Radisson Americas portfolio and excludes certain one-time items including Radisson Americas integration costs, which impacted the second quarter reported results. For second quarter 2023 compared to the same period of 2022, revenues excluding reimbursable revenue from franchised and managed properties increased 28% to $227.8 million. Our adjusted EBITDA grew 18% to $153.1 million, driven by strong unit and effective royalty rate growth, successful execution of the Radisson Americas integration, the robust performance of our platform, procurement and international businesses and continued comparable margin expansion. And our adjusted earnings per share were $1.75, an increase of 22%. Let me turn to our key revenue levers, beginning with our unit growth where our portfolio is absolute size and the royalty revenue per hotel are key advantages. Our strategic goal has been to accelerate quality room growth in more revenue intense segments and markets while simultaneously growing our effective royalty rates, which ultimately results in an outsized increase in royalties. In addition to our mix shift strategy for the broader portfolio, our revenue maximization strategy is also evident at the individual hotel and brand levels. In fact, for second quarter 2023, new hotels we added within a brand continue to generate an average of 20% higher royalty revenue than hotels exiting the brand. For second quarter 2023, our domestic system size of the more revenue intense upscale, extended stay and mid-scale segments grew by 10%, while rooms grew by 12% year-over-year, highlighted by an over 50% increase in the number of…

Thank you. Ladies and gentlemen, we will now begin the question-and-answer session. [Operator Instructions] First question comes from Michael Bellisario of Baird. Please go ahead.

Thanks. Good morning, everyone.

Good morning, Mike.

Good morning. Just the first question on the 2024 expectations. Can you maybe help us understand your underlying assumptions to get to the 10-plus percentage growth rate and then some of the building blocks in terms of dollars that get you there in 2024? That would be helpful. Thank you.

Yeah. Sure, Michael. Let me just start. I mean I think if you look at the organic growth of our business, it's just been exceptional over the last several years. I mean if you look at this year and the years going back all the way to 2017, we've grown EBITDA at greater than 10%, and that trend continues this year. You look at the last year in itself, we grew our earnings organically by 10%, completed a strategic acquisition, bought back 10% of our shares outstanding. And today, we sit with a business that's got multiple avenues of growth. If you look at our brand mix, it's a mix of revenue intense, new construction and conversion hotels from the upscale segment, obey down to the economy segment plus extended stay. Our international business is now much more robust as we talked on the prepared remarks, we've effectively doubled the size of that business. And what's really exciting is the scale advantages now that are going to allow us to really monetize the credit card co-brand opportunity and a lot of the platform revenue opportunities we have with our travel partners. So all of those are factors that are really giving us a lot of confidence in our ability to keep this double-digit EBITDA growth going into the future.

Any other specific building blocks in terms of underlying RevPAR growth, royalty rate expectations? I know you've provided some Radisson commentary.

Yeah. If you think about if you wanted to create a little bit more of a tactical bridge, I mean, in the past, we guided to the fact that Radisson would be increasing from $60 million or more of EBITDA contribution this year to over $80 million. So that's about a 4% growth in terms of the overall EBITDA of the business going forward. talked about our revenue intense unit growth starting to approach those historical levels, so call it 2% to 3% in a more stabilized environment. And so maybe you're getting closer to that 2%, which would represent another 2% overall EBITDA growth. Talked about our platform business, especially just when you think about the co-branded credit card contributing another $5 million or so heading into next year. And then our effective royalty rate, we expect to continue to maintain that in the mid-single digits. So there's really a path get to that 10% even in a RevPAR environment that is essentially flat. Obviously, we to continue to maintain our share, if not grow our share just from an RPI perspective in the future. So the industry RevPAR grows at those historical rates, you would expect to see another couple of percentage points of contribution there as well. But to Pat's point, I think the most important thing is, this business has a ton of revenue levers at its disposal, and there's a path to get there in any sort of RevPAR environment.

Got it. That's helpful. Thanks for the detail. And then just a follow-up on the development pipeline. You mentioned convergence around this 25% versus just the prior quarter, but the overall pipeline is down. So presumably, that's all under construction hotels, correct? And then if that's correct, maybe what's driving that? And when do you see that sort of bottoming out looking forward? Thanks.

Yeah. Part of the pipeline is obviously timing. Obviously, we are focused on higher quality franchise agreements that are being awarded. So we're really targeting those more revenue intense franchise agreements that we anticipate having a higher opening success rate, so maybe the development results when you think about it kind of year-over-year are down slightly. So there is an element there. Pat mentioned the strong openings and the velocity in which these are moving through our pipeline. We do continue to terminate those assets out of our pipeline, but we feel like there's a lower likelihood of success. But when you look at the pipeline itself, Michael, very healthy. Greater than 50% of our domestic pipeline is either under construction, is a conversion hotel or have financing secured. About 30% of our pipeline is essentially conversion hotels, which have a very high opening success rate. When you get back to the back half of the year, that's when you tend to see your development results spike up pretty significantly. So you tend to see quarter-over-quarter growth in the pipeline in quarter four, in particular, that’s significantly higher than what we’ve seen over the course of the last couple of quarters.

Thank you. That’s all for me.

Thank you.

Thank you. The next question comes from Dany Asad of Bank of America. Please go ahead.

Hi. Good morning, everybody. You're -- just at a higher level, your fees grew in the quarter like meaningfully ahead of what RevPAR plus unit growth would give you. So something to the tune of like 6%. And so can you maybe just talk about that and how we should expect that spread to kind of perform as we look into the back half of this year as well?

Yeah, Dany. So when you think about just the fees overall, obviously, the contribution from Radisson are now in those royalty and revenue line items. But on an apples-to-apples basis, the way that I would kind of describe the business right now, is your adjusted revenue for Choice grew at about 9% year-over-year. Pat mentioned the fact that kind of on an apples-to-apples basis, our EBITDA is up almost 10%. So we feel very good about the organic growth prospects of this business. I think going forward, you're going to continue to see strength in some of those ancillary fees platform. We talked about the co-branded credit card, other programs and services that we'll be offering our franchisees. But when you look at the core royalty line item itself, we expect, like I said in the last question, our effective royalty rate will likely grow in the mid-single digits. Every 1 basis point is about $1 million. we think that, that revenue intense unit growth is going to continue to kind of approach those historical levels, and each 1% is about $4.5 million. And then obviously, we talked about RevPAR and just -- we do expect to continue to maintain our steel hare. I think what's core to the outsized royalty performance is really the fact that we're focusing on higher royalty per unit hotels, we are starting to continue to see that mix shift into the more revenue intense segments. But the 20% higher royalty per hotel, even within a brand or a location itself is really driving that earnings algorithm.

Got it. Thank you. And then just on room like if I'm just looking at room count, your domestic room counts are about 5% less than the third quarter of last year for Radisson specifically. And it's sort of natural for there to be some level of churn when there's brand M&A. But I guess my question is, when would you expect that to slow down? And then when would you expect, along with that, any onetime integration costs and all these like the add-backs? When would you expect that to fade?

Yeah, Dany. Let me start, and then Dom can jump in. I mean when we looked at buying this business, it was a business that was effectively underinvested in. And I think a lot of terminations that we've seen were things we expected. We did a pretty significant deep dive into their pipeline and into their existing franchise agreements and -- which franchisees were at risk of leaving. So that was all written into the underwriting of the transaction. It's the reason why we've really sped up the integration here. We want to bring the value prop to these owners quickly and demonstrate the significant upside that they are going to get. We are already seeing it. We're seeing traffic to the hotels that are now integrated onto our systems, increase beyond our expectations. We're seeing the look-to-book ratios go up in the Radisson brands versus where they were prior to being integrated. So we are achieving what we expected to achieve, which is bringing that business delivery and those customers to our franchisees. What we -- now that they're on the platform, we have the ability to now -- you're not just selling the future potential, you're selling reality. And so our development team has been focused on really looking at what is the opportunity now to take that value proposition as we move into the back half of the year here and begin to grow these brands. As we say all along we look at M&A, we want to grow the ROI for the franchisee. Certainly, we're doing that. But we also want to grow these brands for the benefit of our shareholders, and that's what's coming. If you look at what we've already done with some of the key wins we had on both new Radisson Inns and some Radisson retention efforts that we put in place, we've been pretty successful, actually more successful than our expectations were going in. So we feel pretty confident about our ability to get these brands on our platform, get the value proper it needs to be and get them growing into the future.

Got you.

Yeah. Dany and just -- go ahead, sorry.

No. Go ahead.

No, just saying when you think about the 5% or so you're talking about 20 assets, in particular, and Pat mentioned that obviously, in many cases, these were once the comfortable letting go. We've been even more successful on relax and renewals close to 30 hotels. So when it is a higher-quality asset, they're making that decision. I think to your point on when do you expect to see the portfolio stabilize I think we're expecting that to Pat's point, going forward into 2024, I think that you would expect to see stabilization in growth. I think the Radisson legacy brand or the core brand itself more of a conversion brand. So I think we would expect to see that grow faster in the short term. And then I think Country & Suites as more of a new construction brand, you would start to see that more in 2025, but we would expect to see that portfolio stabilize. Your question specifically on the integration cost. We did make the decision to pass Point to invest and rate the integration, and we're happy we did. I think the results speak for themselves, EBITDA tracking much higher than expectations. We would expect these costs, I think, to slow significantly for the remainder of the year. And then at the end of this year, when you look at it on a comparable basis, it would essentially be pretty immaterial. Now a few single-digit millions, maybe we could trickle into 2024. But broadly speaking, we think the heavy lift is kind of now behind us, and you're going to start to see those decelerate heading into the back half of the year.

Great. Got it. And then if I could just sneak in one last one. So given that success, at least we've seen this far with Radisson. How are you thinking about M&A opportunities going forward? And is Radisson giving you like an execution playbook from here on out?

Yeah. I think, Dany, with the WoodSpring acquisition five years ago, which was not really a synergy deal, that was a lift and shift to invest, and it turned out to be a very successful really a home run for us with regard to kind of reinvigorating the extended stay segment for us. And really getting out in front of the rest of the industry. Radisson is different. Radisson is bringing us a higher RevPAR, more revenue accretive, bringing us more of a business traveler, a younger demographic, but a significant amount of synergy as we talk about that $80 million. So we don't always look at these acquisitions from an execution perspective as the same. But we've certainly developed a pretty strong capability within the company to rapidly integrate brands. And it's not a -- I think the playbook is the same for a lot of the underlying key factors. But in all of these things, you have to look at what the value drivers are. And in the case of WoodSpring, we had a very strong pipeline, a very strong prototype. What it needed was the growth engine and the development capabilities that we had, and we've certainly brought that to market. What Radisson needed was business delivery that needed a bigger loyalty program. It needed a bigger platform for reservations. It needed all the tools that we bring on revenue management, Choice University and the like. So each of these is a little bit different. But I would say we’ve developed a pretty strong capability as a company to rapidly integrate and realize the value of an acquisition in a pretty rapid time frame.

Got it. Thank you very much.

Thank you. The next question comes from Stephen Grambling of Morgan Stanley. Please go ahead.

Hey. Thanks. Just want to follow up both on the 2024 commentary and that discussion of M&A. I mean, is there any additional M&A incorporated in the 10% growth through 2024? And then how are you weighing best uses of capital given leverage levels are still below the target that you laid out? It looks like the buyback was a little bit slower in 2Q versus 1Q. Is that a reflection of maybe there's better opportunities for either bolt-ons or other M&A activity? Thank you.

Yeah, Steve. We're always looking for M&A that fits the 2 litmus tests that we talked about, improving the ROI for the owners and growing the brands for the shareholders. I think as we look forward, there's still some white space in our portfolio. There's a lot of potential opportunities on the international front. So those are probably the areas that we'll continue to look at. I would say right now, I mean, there is -- the additional boost in 2024, there's still more to come from Radisson as we mentioned. There's another $20 million of EBITDA in our expected benefit to come in the 2024 number from the Radisson acquisition. Remember, Radisson also brought an upper upscale brand Radisson Blu, we brought Radisson Individual. So there's some other brands that we acquired that are going to give us, I think, some longer-term opportunities to continue to grow in segments that we aren't in today. So we can do it organically. But there's also -- M&A also provides an opportunity potentially to do some bolt-on when those opportunities arise. I mean I think if I look at the shareholder or share repurchase, during the Radisson acquisition last summer, we were effectively blacked out from buying our own shares in. So back in August, when the window opened, we were planning a little bit of catch-up. And then I think it's a reflection of the fact that we believe that -- and it's the reason we did our business update in early July. We just didn't believe that the market was understanding the true growth potential that we had. I mean, I think consensus for next year was at like 4% EBITDA growth. So it gave us an opportunity to get out and talk about that growth. And when we see our shares at a discount to intrinsic value, we've been pretty aggressive on the share repurchase front. So I think you'll continue to see that so long as the shares remain at a discount to intrinsic value.

Got it. And then one other quick follow-up. I think you mentioned this a little bit, but where are you finding conversions are generally focused as we think about brand or chain scale? And do you typically have line of sight to this kind of shorter duration segment of growth on royalty contribution versus the base? Thank you.

Yeah. I think when you look at the opportunity out there, as our value proposition gets better as our franchisees and our franchisee retention rate stays best-in-class. Franchisees own other brands and own independent hotels. So a lot of the prospecting we do is within our own franchisee base. There are 26,000 independent hotels in the United States that are in the upscale and below segments. So there's an ample opportunity for independent hotels as well for conversions. And this is a company that's been doing the conversion game here for 20 years, 19 of our brands are conversion brands. So we have a lot of opportunity. And it’s one of the reasons why we wanted to highlight that. The market where we are today with interest rates being where they are and likely to stay there, the opportunity is going to shift towards more conversions, and this has always been a strength of Choice. We’ve proven it during previous points in the economic cycle when interest rates were high. So it’s something that we know how to do well, and we have a really strong track record of achieving conversion growth rates in our pipeline and ultimately in our hotel openings numbers.

Thank you.

Thank you.

Thank you. The next question comes from Robin Farley of UBS. Please go ahead.

Great. Thanks. Most of my questions have been covered already, but I did just want to clarify. I know you said there are a couple of different ways to get to your 24% guidance. But did you -- or maybe could you clarify that you're not counting on any acquisitions to get to that? Thanks.

No to Pat's point, the -- obviously, the $20 million of additional contribution from Radisson is included in that 10%, but no acquisitions outside of the Radisson integration.

Okay. Great. Thank you.

Thank you.

Thank you. The next question comes from David Katz of Jefferies. Please go ahead.

Hi. Good morning. I had two things, if I may. One is, I just want to be clear, Patrick, earlier you indicated white space and international opportunities. Is the white space and the international opportunity is the same thing or are those concentric opportunities, right, where you see white space here in the U.S. in addition to international? And then I have one quick follow-up, please.

Yeah. I think, David, it's both. So there's white space domestically. I mean if you think about where we are in extended stay, we have -- we're having a lot of success with Everhome in the mid-scale extended space segment, but we don't have a product in upscale extended stay. So that's an opportunity for us. Certainly, we are -- just have a little bit of a toe in the water with upper upscale with the rates and Blues in the Radisson collection that we have. So there's some opportunity there. But when you look internationally, see the same thing. You see significant routes and blue opportunity internationally in the Americas where we have the opportunity to grow. And I would say when we look at the international markets, there's a lot of different product type that doesn't play well in the Americas region. So when you look at a lot of potential acquisitions outside of the U.S., the product type may be different. It may not be something that you see here in the U.S. So there's shorter stay, there's rooms where they convert from a business traveler to a leisure travelers. So there's some different models out there on the international front that really work for certain international markets. So I would say when we're looking across the landscape, there's certainly white space in the U.S. and in international. But there's also different product types that are lodging alternatives in the international side as well. So that's effectively what we see when we look across the landscape. And when we see we can bring value, that's where we look for opportunities to maybe bring that into our portfolio.

Understood. And if I may, I wanted to circle back on the conversion opportunity. And I think, Patrick, in your prepared remarks, you sort of referenced uniquely positioned. And there's no question that you have a sizable scale platform and track record, et cetera. But from the physician where many of us sit we're hearing more and more larger entities also talking about pursuing conversion opportunities. What have you -- what are you able to do to just remain competitive and protect those -- the opportunities that you've had in the past and continue to capture those as you have?

Yeah. I think when you get into the conversion market, you're dealing with a lot of different issues as a company than you might if you don't do that on a regular basis. So everything from brand overlap to making sure that PIPs are tailored to the right product, the right market, the right owner and effectively making sure that those PIPs get completed. And a PIP conversation is not a sale of a franchise. The sale of a franchise is rather uniform, a PIP conversation is rather complex and detailed. It involves a lot of back and forth, I would say. And you really have to make sure that you're achieving what you expect from that hotel in that market for that brand. So it's a different approach to the owner. And it's something, as I said, we've been doing for over 20 years. We do it in multiple brands, and it's a core competency that we've built. So when I think about being best-in-class and being uniquely qualified, A lot of it comes from experience and that experience drives lessons learned for you on what works and what doesn't. So that's why we're fairly confident in not fairly, but we're highly confident in our ability to continue to be a growth leader on the on the conversion front because it's what we do is our core competency, and it's what's driven a lot of our brand equity and brand growth over the past 20 years.

Yeah. David, when you look at the numbers historically speaking, our churn has been somewhere in that 4% to 5% range. The vast majority of that is essentially your involuntary churn. So it's a choice of discretion. It's our discretion to terminate that particular franchisee. When you take a look at where the churn has been year-to-date and where we expect the churn to be by year-end, we're actually tracking at the lower end of that 4% to 5% range. Again, from a voluntary perspective, you're still in that historical, call it, 1% to 2% or so range. So we're feeling pretty good about where we stand from a term perspective.

Understood. Thank you.

Thank you.

Thank you. The next question comes from Brandt Montour of Barclays. Please go ahead.

Hey. Good morning, everybody. Thanks for squeezing me in. I just want to ask if you could give us the exact Radisson EBITDA baked into the full year $23 million, and I guess we can just add $20 million on to that number to get to the new number for '24?

Yeah, Brandt. So broadly speaking, we've talked about greater than $60 million. I would expect maybe there's an opportunity to be slightly below that $65 million or so. Obviously, that could create a little bit of a winner's curse. So part of this is timing of the synergy. So I think it's safe to assume for the time being that when you look at the 2024 EBITDA, just over $80 million for Radisson is what you should expect.

Okay. Thank you for that. And then you guys reaffirmed full year guidance just a few weeks ago in a pre-announcement and then obviously, you raised today. What changed over the last three weeks?

Yeah. So when you think about just how things have shifted, obviously, when we reaffirmed guidance, we felt pretty good about being within the range. Obviously, we moved up that lower end of the range from the $525 million up to $530 million. the financials came in. Obviously, once we closed the books, the financials came in a little bit better than we expected. Really, the drivers there, effective royalty rate continues to trend above expectations. We talked about the platform business, some of those other fee streams, the co-branded credit card. And what we're really seeing is a lot more green shoots in terms of the international portfolio as well, both from an actual perspective. The rebound internationally has been pretty impressive as well. When you take a look at the portfolio, higher room counts, et cetera. And when you think about where RevPAR is in our portfolio internationally, I mean, we're tracking 15% to 20% above 2019 levels, which is pretty remarkable when you think back to where we were just about 12 to 18 months ago. So I think it just gave us more optimism that we were going to meet that higher end of the adjusted EBITDA guidance. And when you flow all those puts and takes through – we made the decision to make some additional investments off of the marketing and res fund, which had a slight impact on the as-reported net income. Obviously, from an adjusted perspective, that’s removed. So broadly speaking, we’re pretty bullish on that $530 million to $540 million. And if all the chips fall into place, I think we could see a scenario where we’re tracking to the high end of that guidance.

Great. Thanks so much.

Thank you.

Thank you. The next question comes from Patrick Schulz (ph) of Truist Securities. Please go ahead.

Hi. Good morning, everyone.

Good morning.

Good morning.

Good morning. When I think about some of the large public to public transformative, and I would say keyword transformative M&A in the past, I think about Marriott and Starwood. Pat, are you able to view that bigger or materially bigger and transformatively bigger can, in fact, be better at this point for your company? Thank you.

Patrick, as you know, our policy is not to comment on market rumors, if that's kind of where you're going. Obviously, and we've talked a lot about this, and you saw in our script today, the scale benefits of the Radisson acquisition, bringing another 10 million loyalty program members, bringing in 10% more hotels, bringing in more revenue accretive hotels. All of those things are creating a bigger business that is not just a royalty and RevPAR and unit growth story but it's providing more of the ancillary revenue opportunities for us that have been unlocked by doing an M&A transaction like that. So certainly, scale matters. And we have scale today. And we have scale in the upscale segment. We have scale in the extended stay segment. We certainly have scale in our core mid-scale and economy segment. So I think if your question is the scale matter, absolutely, it does. We've done two acquisitions in the past that have been very successful from the standpoint of expanding our presence in key markets where we were underrepresented. So yes, there's definitely benefits to M&A that bring that scale advantage to you.

Okay. Thank you. Along those lines, for the -- hypothetically for the right acquisition, what net debt to EBITDA level would you feel comfortable going up to? Thank you.

Patrick, I don't think we comment on that. I think at the end of the day, you've got to look at it from all of your different stakeholder groups and any acquisition publicly speaking, our targeted range is that 3 times to 4 times. I think for any sort of investment that would really drive long-term value for all those constituencies. Would you -- could you see it at kind of that high end of that leverage ratio or a little bit higher? Sure. But broadly speaking, our stated policy is that 3 times to 4 times.

Okay. Thank you.

Thank you.

Thank you. The next question comes from Joe Greff of JPMorgan. Please go ahead.

Happy morning. I have another question on your comments on 2024. Of the $50 million to $55 million of incremental EBITDA in 2024 versus this year, how much of that comes from royalty fees versus lower adjusted SG&A? And I have a couple of quick follow-ups.

Yeah. I mean I think what you would expect on the SG&A line item in the future. Obviously, what we talked about, and I think it was maybe one or two quarters ago that you would see the Radisson SG&A, which is slightly above $20 million, dropped to somewhere in that $6 million to $7 million range. So we're feeling very good about heading into 2024 that kind of the integration and the synergies would be behind us. So portfolio-wide, Joe, you would expect to see SG&A grow in line with your historical averages, which have trended to kind of the low-single digits, obviously, for the right investments, we would bring that up to maybe mid-single digits. So kind of puts and takes, I think, bring the revenue-intense unit growth. We talked about close to that 2%, which would be about $9 million, ERR in the mid-single digits. And then obviously, I think it's too early to tell in terms of guiding to any sort of RevPAR in 2024. I think you're going to see where the industry is going to be heading as we head into the back half of this year. But I think the point on that 10% is even in a flat RevPAR environment, that there was still a path to get there.

And I'm -- maybe I'll put words in your math and then you can sort of paraphrase me on how you're thinking about royalty fees for next year. But if you're assuming a portfolio blended RevPAR that's flat and even with modest rooms growth next year, you're assuming you can grow royalty fees just based on better mix of upscale and higher price point hotels. Is that how you're broadly thinking about next year?

Well, I think you can grow your royalty rate very much in line with what we have. So I think from a RevPAR perspective, even a mix -- so I think you're going to get some benefits of a mix shift story without a doubt as you continue to deliver more royalty in the higher revenue intense segments. I think broadly speaking, I think there's absolutely still a path even if that royalty -- or that RevPAR rate was muted that you can still get to that 10% with your other 2 levers that you have. So the revenue intense unit growth, especially the fact that higher rooms will probably come with that revenue intense unit growth and your effective royalty rates.

Great. And then I have a follow-up. With respect to operating restructuring, due diligence and transition costs and what you have implied for the second half. And I know it sort of gets adjusted -- gets added back to adjusted EBITDA. How much of that falls into the 3Q versus the 4Q? I'm assuming most of it is in the 3Q. And then my last question is, are there any reasons presently that precludes you from buying back stock here in the 3Q and 4Q? And that's all for me.

No, I think broadly speaking, I think Pat hit on the -- I'll hit your second question first. As it pertains to the stock buybacks, we would expect to continue to repurchase our shares. I think when you look at -- I know there's some commentary around a slight deceleration from Q1 to Q2. But when you look at the $76 million, that's still well above what we've done historically. And to Pat's point, I think we're playing a little bit of catch-up coming out of the blackout from Radisson. Plus we're still at a point where we feel like our shares continue to trade at a discount. So I -- at a 2.7 times leverage ratio. We certainly have capacity to continue the share repurchase program. I think when you look at the Radisson integration costs, in particular, you would just see a sequential quarter-over-quarter deceleration from Q2 into Q3, from Q3 into Q4, as I mentioned, probably some immaterial – some residual integration that may slip into 2024, just some of the modest scope that may have gotten deferred. But I think from a broad perspective, I think 2024 integration costs would be immaterial when you compare it to what the 2023 cost was.

Thank you.

Thank you.

Thank you. There are no further questions. I will turn the call over to Pat Pacious for closing remarks.

Well, thank you, operator. Thanks again, everyone, for your time this morning. We'll talk to you again in November when we announce our third quarter results. I hope you all have a great day.

Ladies and gentlemen, this does conclude the conference call for today. We thank you for your participation and ask that you please disconnect your lines.