Hilton reported a record level of hotels and rooms in its development pipeline in conjunction with strong performance in the second quarter.
For now, Hilton executives see continued strength of the leisure demand segment even if it could soon soften. Globally, Hilton's hotels in China are still struggling due to a lower volume of flights to the country's major markets.
During its second-quarter earnings call with analysts and investors, Hilton President and CEO Chris Nassetta said the company showed net income for the period of $422 million and adjusted earnings before interest, taxes, depreciation and amortization coming of $917 million. Revenue per available room across its entire portfolio was up 3.5% year over year, he said.
Kevin Jacobs, chief financial officer and president of global development, said increased international bookings and stronger group travel were key drivers of growth during the quarter.
In the second quarter, Hilton's hotel RevPAR grew in Americas by 3%, in Europe by 7% and in the Asia Pacific by 11%. Improvement in Japan and South Korea boosted performance in the Asia-Pacific region, even with Chinese performance dragging regional performance down, as it has for all international hotel brand companies.
Nassetta said there is significant travel going on in China, despite its economic issues. He said several nations in the Asia-Pacific region have visa-free travel for Chinese travelers, which has boosted movement, but there remains a lack of international airlift for inbound travelers.
“That will take time,” he said, referring to when that airlift will recover.
Overall, Nassetta said he is pleased with the global landscape for travel.
“We’re well-positioned to drive meaningful cash flow and shareholder returns. … There is robust business demand growth,” he said.
He added he saw increases for all demand levers, even if leisure transient will soften.
“It is not cratering in any way,” Nassetta said.
“RevPAR from large corporates increased 5%. There is strong summer demand, especially in international markets, and booking windows continued to lengthen.”
Jacobs said guidance now is that net income for the full year is “projected to be between $1.53 billion and $1.55 billion, [with] diluted earnings per share … projected to be between $6.06 and $6.15.”
Record Pipeline
Hilton's portfolio growth continues to be robust, Nassetta said, adding that the firm now has more than 8,000 hotels in operation.
In the first half of the year, Hilton signed 62,700 rooms for a new record pipeline of 508,300 rooms, which is a 15% increase from the same period in 2023. Nassetta said half of Hilton's pipeline is in construction.
In the second quarter, Hilton opened 22,400 rooms, which in net additions is an increase of approximately 18,000 rooms, raising its net unit growth to 6.2%.
Several bolt-on acquisitions fueled Hilton's net-unit-growth increase, Nassetta said, notably the $210 million acquisition of Graduate Hotels from AJ Capital Partners, and the acquisition of a majority stake in luxury-lifestyle brand NoMad Hotels from Sydell Group.
Then in July, Hilton added approximately 400 hotels and approximately 18,000 rooms via a strategic partnership with Small Luxury Hotels of the World.
Nassetta said that new Hilton brand Spark debuted internationally with a property in London, which he added was notable in that it came online only nine months after the brand first opened in the U.S.
In the company's earnings release, Nassetta said he was bullish.
“Looking forward to the rest of the year, with the continued growth of our existing brands, as well as the addition of our new brands and strategic partner hotels, we expect net unit growth of 7% to 7.5% for the full year,” Nassetta said.
In June, Hilton replaced a loan of $1 billion that is due to mature in June 2028 with a $1 billion loan due to mature in November 2030, and it comes with a reduced interest rate “of the secured overnight financing rate plus 1.75%.
He added that at the end of the second quarter, Hilton had debt of $10.3 billion, excluding the deduction for deferred financing costs and discounts, which had a weighted average interest rate of 4.81%.
At press time, Hilton’s stock was trading at $203.91, up 13.2% year to date. The NYSE Composite Index was up 7.7% for the same period.
Editor’s note: Christopher J. Nassetta serves on the board of directors for Hotel News Now’s parent company, CoStar Group.