The pressure has been on for Hilton to grow, and the company’s latest moves underscore its long-term views for global expansion in the luxury and lifestyle hotel segments in particular.
Hilton CEO and President Chris Nassetta detailed the growth potential for two of its latest brand deals — Graduate Hotels and NoMad — on the company’s first-quarter earnings call with analysts.
The company’s $210-million acquisition of Graduate Hotels from AJ Capital Partners, its first bolt-on brand acquisition in years, will add 35 Graduate hotels to Hilton’s portfolio in the second quarter.
“Graduate presents an opportunity to serve more guests, especially in markets where we’re not present today,” Nassetta said. “With thousands of colleges and universities around the world, the addressable market for the brand is 400 to 500 hotels globally.”
More recently, in April the company acquired a majority controlling interest in Sydell Group to expand the luxury lifestyle NoMad brand.
Kevin Jacobs, chief financial officer and president of global development for Hilton, forecasts “upwards of 100 hotels over time” fitting into the NoMad brand, mostly through new construction with a few conversions sprinkled in.
Nassetta shared some color into the genesis of that deal, acknowledging that Hilton spent years investigating launching a homegrown brand in the space but instead chose to acquire the stake in Sydell Group because it was “a bull's-eye for what we think modern luxury lifestyle is today and what customers are looking for going forward.”
These two deals represent the recent investments Hilton has made in luxury and lifestyle brands in the first quarter.
In February the company detailed its booking partnership with outdoor hospitality company AutoCamp, and another with Small Luxury Hotels of the World. Both partnerships expand the offerings on Hilton’s channels and loyalty program.
And while Nassetta said the company doesn’t have any other “of those sorts of tricks up our sleeves” in terms of brand acquisitions, it absolutely is working on more partnerships “in the experiential arena,” he said, citing examples like safaris, yacht trips and riverboat cruises.
“These connect to our business and give our customers incremental things they want to do that are not in conflict with our business but synergistic,” he said.
Development and Pipeline
The company’s latest acquisitions and partnerships have yet to hit its room count, but the company still notched records in the quarter.
Hilton opened 106 hotels totaling nearly 17,000 rooms in the first quarter, contributing to net unit growth of 5.6% from March 31, 2023. As of the end of the quarter, Hilton’s global portfolio had 7,626 hotels and 1,197,329 million rooms open. Hilton Grand Vacations accounted for 94 of those hotels and 16,329 rooms.
About 30% of openings in the quarter were conversions, driven largely by the DoubleTree by Hilton and Spark by Hilton brands. Notable openings included the 3,000th Hampton by Hilton hotel.
Hilton approved nearly 30,000 new rooms during the first quarter, bringing its development pipeline to a company record of 472,300 rooms.
It’s a 10% growth over the same time last year.
Systemwide construction starts are up 45% versus last year, and approximately half of the pipeline is under construction, Nassetta said.
Performance by the Numbers
Revenue per available room grew 2% in the first quarter over the first quarter last year, to $104.16 systemwide. Average daily rate rose 1.7% to $154.91 and occupancy grew 0.2% to 67.2%.
Globally, Hilton’s Middle East and Africa hotels saw the largest year-over-year RevPAR gains, growing 14.8% to $142.23. The region also led ADR gains. The U.S., on the other hand, was the laggard — a factor Nassetta and Jacobs said was expected.
The United States was the only region that lost occupancy in the first quarter of 2024 compared to the same time last year, dropping 60 basis points to 67.7% and taking RevPAR for the quarter down 40 basis points to $109.53.
For the year, the company is maintaining a RevPAR growth outlook of 2% to 4%, with the U.S. falling on the low end of that guidance.
As of press time, Hilton’s stock was trading at $209.44 a share, up 16.3% year to date. The NYSE Composite was up 5.4% for the same period.
(Updated on April 26 to more accurately reflect Hilton's total portfolio size at the end of the first quarter, including Hilton Grand Vacations, in the thirteenth paragraph.)
Editor’s note: Chris Nassetta serves on the board of directors for Hotel News Now’s parent company, CoStar Group.