Expansion remains high on Hilton’s priority list, and this year, that will happen through new brands, affiliations and overall net unit growth.
Hilton struck a partnership with Small Luxury Hotels of the World “to meaningfully expand our luxury distribution,” company CEO and president Chris Nassetta said on Hilton’s earnings call with analysts. Hilton’s loyalty members will be able to book, earn and redeem points at SLH’s 560 luxury hotels around the world.
Nassetta called the partnership, which will roll out later this year, “an unbelievable way for us to take our 150- to 160-hotel luxury portfolio and turn it into 600 to 700 hotels scattered in all the best, unique and hard-to-duplicate places around the world.”
SLH will opt in to the partnership with Hilton, with no branding or affiliation changes on that end. The collection will have access to Hilton Honors loyalty members, the Honors loyalty program and Hilton’s commercial booking channels. In return, Hilton will collect licensing fees “in the zone of what we typically get with our brands,” Nassetta said.
SLH has an existing alliance with Hyatt Hotels Corp., giving that company’s loyalty members access to earn and redeem points at participating hotels as well.
Nassetta is enthusiastic about the benefits of this SLH partnership, but he said it’s separate from the company’s established plans to launch a new luxury lifestyle brand “sometime this year.”
“We intend to enter that space one way or another and we’re hard at work,” he said.
Nassetta also addressed rumors that Hilton was planning to acquire the Graduate Hotels brand, owned by AJ Capital Partners. He didn’t confirm the rumor but didn’t outright deny it.
Hilton traditionally builds, rather than acquires, brands — in 2023, the company launched Spark by Hilton and LivSmart Studios by Hilton — but Nassetta said “never say never” in regards to an acquisition.
Hilton has kicked the tires on potential brand acquisitions over the years, but none have passed what Nassetta calls its “very tough filtration system.”
Times are different now, he said.
“The environment we’re in is a little bit different.” Nassetta said. “There is … more stress in the system than normal, that probably presents more opportunity to do things like [an acquisition], but things that are modest in my view, and what I view as tuck-in acquisitions.”
No matter the avenue, net unit growth continues to be top on Hilton’s list. The company achieved a record 24,000 room openings in the fourth quarter of 2023, contributing to net unit growth for the full year of 22,300 rooms.
Pipeline
Hilton achieved a pipeline high at the end of 2023, with a record 462,400 hotel rooms in development in 118 countries and territories. More than 200,000 of those pipeline rooms are under construction and nearly 260,000 are located outside of the U.S.
Hilton projects net unit growth for 2024 to range between 5% and 6%.
Performance
Revenue per available room came in at $113.90 for 2023, a 12.6% jump over 2022 levels and 10.7% over 2019, right in the range Nassetta anticipated at the end of the third quarter.
Growth in both average daily rate and occupancy contributed: Occupancy rose 6.8% over 2022 levels to 71.8%, and ADR grew 5.4% over 2022 to $158.62 for the year, according to the company's earnings release.
Hotels in all of Hilton’s regions posted occupancy in the 69% to 72% range for the year, led by Europe at 72.5%. The Asia-Pacific region experienced the most accelerated growth of all three key performance indicators compared to 2022, ending 2023 with 70.1% occupancy, which was up 35.1%; $113.54 ADR, which rose 17.5%; and $79.61 RevPAR, which grew 58.7%.
Segmentation
Business transient and group business hit a solid stride in the fourth quarter of 2023 for Hilton. Group RevPAR rose 6% compared to the fourth quarter of 2022, driven by both small- to medium-sized group business and convention demand.
Nassetta called group demand “off the hook,” pointing to strong future bookings, continued strong pent-up demand and the return of large association and citywide events.
“Rate will be very strong” for group, he said. “There is so much demand and a limited amount of space, since the supply of hotels built over the last 10 years with a lot of meeting space has been anemic.”
Business-transient RevPAR grew 4% in the fourth quarter of 2023 compared to 2022, and leisure RevPAR increased 3% in the same time frame.
Nassetta anticipates continued growth for both business transient and leisure demand, with rate growth driven by low supply and continued desire to travel.
As of press time, Hilton's stock was trading at $197.99 a share, up 8.7% year to date. The NYSE Composite was up 2% for the same period.
Editor’s note: Chris Nassetta serves on the board of directors for Hotel News Now’s parent company, CoStar Group.