Hilton is putting Spark to flame one year after launching its economy brand.
The company opened more than 20 Spark by Hilton hotels in the third quarter, taking the brand’s number of hotels open to 28 and more than 2,600 rooms. But Hilton CEO Chris Nassetta says the real story is the Spark pipeline, which now sits at 67 hotels and more than 6,000 rooms. Spark hotels are open in the U.S., U.K. and Canada, and the brand has deals signed in Germany and Austria.
“The brand’s pipeline is three times larger than its existing supply, and we expect continued launches in European markets,” Nasseta said on the company’s third-quarter earnings call with analysts.
Spark’s growth contributed to Hilton’s highest net-unit-growth quarter in its history, up 7.8% from last year. The company has 8,200 hotels open in all of its brands, including 1.2 million rooms, as of the end of the quarter.
Hilton’s development pipeline grew 8% year over year in the quarter. It now sits at nearly half a million rooms, and approximately half of those rooms are under construction, Nassetta said.
Conversions accounted for more than 30% of Hilton’s signings in the quarter and 60% of its openings in the quarter, including hotels in the Spark, Curio, Tapestry and DoubleTree by Hilton brands.
Still, “softer-than-expected” revenue per available room performance in the quarter provided a reality check. Nassetta attributed that low growth to slower ramp-up following the Labor Day holiday in the U.S., weather-related challenges, unfavorable calendar shifts and ongoing labor disputes in the U.S.
Group RevPAR was the standout in the quarter, growing more than 5% year over year. Business-transient RevPAR grew 2% in the quarter, and leisure “normalized," Nassetta said, declining “modestly.”
Group and business-transient hotel demand will keep overall RevPAR chugging at a similar pace for the remainder of the year, he said. However, “the election and ongoing labor disputes in the U.S.” likely will have an impact.
Hilton's RevPAR is projected to increase between 2% and 2.5% for the full-year 2024, compared to last year. Hilton knocked the midpoint of that range down 25 basis points from its projections last quarter.
“The punch line is that next year’s going to look a lot like this year,” Nassetta said. “The macro view is resiliency. There is a broad consensus that … while the economy has been slowing, it remains strong, resilient and showing positive growth.”
More on growth
The brands Hilton added to its portfolio earlier this year — NoMad, Graduate by Hilton and Small Luxury Hotels of the World — launched on Hilton booking channels in the third quarter.
The record 531 openings in the third quarter included Hilton’s 8,000th hotel worldwide, its 900th in the Asia-Pacific region and its 900th in the Europe, Middle East and Africa region.
Hilton expects net unit growth in 2025 to be between 6% and 7%, according to its earnings release.
Around the world
Hilton’s development pipeline is just about evenly split between the U.S. and outside of the country. The company added 27,500 rooms to the pipeline during the quarter, bringing it up to 3,525 hotels and 492,400 rooms in 120 countries, including 28 new to Hilton.
Hilton’s hotel performance suffered in China in the quarter as RevPAR fell 9% due to the issues around low inbound travel and weather the industry continues to face globally. But hotel performance around the Asia-Pacific region was not that bad, said Kevin Jacbos, Hilton's chief financial officer and president of global development. RevPAR in India grew 4% in the quarter, offsetting the China number a bit, and bringing full Asia-Pacific region RevPAR down 3%.
Group business demand drove U.S. hotel RevPAR up 1% in the quarter. The Americas excluding the U.S. saw 4% RevPAR gains, driven by strong performance in Mexico. Europe hotel RevPAR grew 7% thanks to sporting events, and the Middle East had 3% RevPAR gains, driven by occupancy gains in Qatar and Riyadh.
Looking ahead
“I think we’ll see both demand growth and pricing growth in the group segment” moving forward, Nassetta said.
Business-transient demand will “continue to grind up,” likely surpassing the prior 2019 peak of demand, and leisure will continue to normalize, thanks to inflation, he said.
“When you blend it all together, next year will look a lot like this year,” he said. “It’ll be a nice blend of demand and pricing.”
At press time, Hilton’s stock was trading at $234.34, up 30.9% year to date. The NYSE Composite Index was up 18.47% 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.