Hilton President and CEO Chris Nassetta is comfortable with the company's popularity among hotel investors and owners, and he is optimistic that 2025 will benefit from broader economic certainty.
Hilton notched record 7.3% net unit growth in 2024 and expects an additional 6% to 7% on top of that in 2025.
But can that momentum continue this year as hotel operating costs continue to rise? Nassetta thinks so, for a number of reasons.
"How are we defying gravity in what's been a difficult environment for new construction and development generally?" Nassetta asked on the company's fourth-quarter and full-year earnings call with analysts.
His answer comes down to Hilton's popularity, grabbing what he called "a disproportionate share" of both hotel conversions and new-build financing, even in a high-interest-rate environment.
Conversions accounted for 45% of Hilton's openings in 2024. Luxury and lifestyle brands made up half of the company's openings, and construction starts were up 10% year over year.
Overall, Nassetta said the company feels "incrementally a bit better than we did a quarter ago," largely because the U.S. election is in the rearview mirror.
"Fast-forward to today, we have an election that's complete," he said. "There's a broad belief ... that the opportunity for economic growth in the short to intermediate term will be better."
Nassetta is taking a longer view on what he called the "friction" of interest-rate pressure and other economic and political challenges.
"Over the next year or two broadly, interest rates will come down. People feel the bid and the ask are coming closer because performance has ticked up a bit," he said. "And I do believe people are seeing more availability of capital. There's certainly a lot of friction, but I sense a movement to a more positive place."
Right now, Nassetta said he hasn't heard from owners or developers about a meaningful impact on costs from potential tariffs.
He called current news about tariffs on goods from Canada, Mexico and China "a series of trade negotiations that are delicate, part of the strategy to getting the right kinds of deals in the end."
Nassetta pointed to Hilton's "aggressive diversification" of its supply chain since the pandemic.
Looking ahead, Nassetta said business-transient travel is the segment that needs to pick up ground generally speaking this year.
That'll happen as "a more normal cycle of people getting back to the office and getting more serious about running their businesses and getting back to business as usual" occurs, he said.
"That bodes well for business-transient recovery. Rate structures are higher, we're not back to prior levels of demand, but I think by the end of the year there's a pretty good shot of being able to do that," he said.
Notable openings this year
This year will bring several notable luxury openings in the Waldorf Astoria and Conrad brands around the world. Waldorf Astoria New York is slated for a spring reopening. Additional Waldorf Astorias will open in Costa Rica, Shanghai, Osaka and Morocco, while Conrad has planned openings in Hamburg and Athens.
Performance
Hilton's systemwide comparable RevPAR increased 3.5% to $110.33 in the fourth quarter and 2.7% to $115.09 in the full year compared to the same periods last year.
Average-daily-rate gains drove RevPAR in the quarter and for the full year; ADR grew 1.9% in the quarter to $157.73 and it grew 1.6% in the full year to $159.55.
Systemwide occupancy reached 69.9% in the fourth quarter and 72.1% for the full year, both relatively flat gains.
Management and franchise fee revenues rose 4.8% in the quarter and 9.1% in the year.
At press time, Hilton’s stock was trading at $272.24, up 40% year over year. The NYSE Composite Index was up 18% 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.