A roundup of first-quarter and full-year earnings from public U.S. hotel companies:
Hilton
On Wednesday’s earnings call, Hilton CEO Chris Nassetta expressed optimism with the company’s growth pace and pipeline, and said that while growth in Europe and Asia-Pacific wouldn’t be “quite as robust,” it would still outpace the U.S.
For fourth-quarter 2017, income from continuing operations was US$841 million, compared with a loss of US$388 million year-over-year. Adjusted EBITDA was US$498 million, compared with US$401 million YOY. The company did not offer details of any impact to U.S. tax reform.
For full-year 2017, income from continuing operations was US$1.264 billion, compared with a loss of US$8 million for 2016. Adjusted EBITDA was US$1.965 billion, compared with US$1.543 billion for 2016. Read the full results here.
The McLean, Virginia-based company opened more than a hotel a day in 2017 and ended the year with the most rooms under construction in the industry, Nassetta said. In 2018, he expects 100,000 more rooms to open, with soft brands Curio and Tapestry both expected to double their presence, with 50 open and 80 in the pipeline; Tru will open its first international property, in Canada, this year, with a total of 50 expected to open this year and 100 in 2019.
Other comments
U.S. inbound travel: Nassetta said international inbound revenue fell about 4% last year but that he expected it to be “flat to modestly up.” That’s partly due to the dollar, he said, but he “hoped” that also could be due to work being done by industry groups and hotel companies with the current U.S. administration to “soften the edges” of its messaging to the international audience while maintaining a strong security posture. “I’d like to think we’re making progress there, and we’ll keep working on this.”
Loyalty: The company saw a record number of loyalty members sign up in Asia-Pacific, for a total of 71 million worldwide. Enhancements to the Hilton Honors program this year will include the ability to gift upper-tier membership, rolling over nights and more credit cards associated with the program.
U.S. tax policy: Regarding recently approved tax reform policies in the U.S., Nassetta said, “We think this will be good for the overall economy,” for Hilton and hotel customers. Anecdotally, he said, customers view the revisions as positive, and “my expectation is that if forecasts are right, this is going to help move GDP growth up,” which should help drive corporate transient growth. “I’m an optimist by nature, but I think there are reasons to be optimistic” about the coming year, Nassetta said.
“Between HLT’s newer brands and future brands that may get announced this year (as has been alluded by the company), there continues to be a good runway of new rooms development for years to come,” reported Patrick Scholes of SunTrust Robinson Humphrey. “New brands will particularly help mitigate the impact from the expected slowdown in new rooms growth in the US, although we are more reserved near-term about rising construction costs and labor shortages. We see new room signings and openings as the primary driver of earnings growth for at least the next two years.”
Wyndham Worldwide
Parsippany, New Jersey-based Wyndham Worldwide announced fourth-quarter and 2017 results, impacted not only by a U.S. tax benefit but by the company’s classification of its European vacation rentals business as a discontinued operation.
For the fourth quarter, revenue from continuing operations was US$1.2 billion, up 4% compared with the prior-year period. Net income was US$462 million compared with US$164 million year-over-year, impacted by a US$426 million tax benefit. Adjusted net income US$152 million, compared with US$147 million YOY. Full-year revenue from continuing operations was US$5.1 billion, up 3% compared with the prior year. Net income was US$819 million compared with US$545 million in the prior year.
“As we continue the process of separating into two publicly traded companies, our business momentum remains strong,” said Stephen P. Holmes, chairman and CEO. “Our teams have continued to execute against our strategic and operating plans; we continued to return cash to shareholders through dividends and share repurchases; and we have positioned our businesses for future growth.”
Hotel group revenue increased 5% to US$332 million in the fourth quarter of 2017, compared with $316 million in fourth quarter 2016. Results reflect higher royalties and franchise fees as well as higher pass-through marketing, reservation and Wyndham Rewards revenues. Read other results here.
Wyndham’s purchase of La Quinta Holdings’ franchising and management operations for US$1.95 billion in cash, which will add nearly 900 managed and franchised hotels to the portfolio, is expected to close in the second quarter of 2018. Also for 2018, the company projects revenue of of US$5.26 billion to Us$5.40 billion, an increase of 4% to 6% and adjusted EBITDA of US$1.330 billion to US$1.355 billion, which represents year-over-year growth of 6% to 8%.
Marriott International
Worldwide comparable systemwide constant dollar RevPAR rose 4.6% in fourth-quarter 2017; in North America, it rose 3.9%. For the full year, RevPAR rose 3.1%; in North America, it rose 2.1%. The company added over 76,000 rooms during 2017, 30,000 in international markets.
Marriott’s worldwide development pipeline increased to approximately 2,700 hotels and more than 460,000 rooms, including nearly 34,000 rooms approved but not signed.
Fourth quarter 2017: Reported net income totaled US$201 million, an 18% decrease year over year. Adjusted net income totaled US$415 million, a 24% increase YOY. EBITDA totaled US$808 million, up 7%. Read the full report here.
“2017 was a terrific year. We made great progress on the integration of Starwood, capturing significant property and corporate overhead cost synergies while also increasing our worldwide RevPAR index,” said Arne M. Sorenson, president and CEO of Marriott, according to a statement. He said that in 2018, the company expected the number of rooms would increase roughly 7% gross and that global RevPAR would increase by 1% to 3%. “As a result of U.S. tax reform, we expect our effective tax rate in 2018 will decline meaningfully to approximately 22%.”
“2018 guidance ranges appear sufficient to satisfy heightened investor expectations, in our view, but all of the moving pieces could cause some confusion and comparability issues (at least initially),” reported Michael Bellisario, analyst with Baird Equity Research.
Hyatt Hotels Corporation
Hyatt President and CEO Mark Hoplamazian said in a statement that the company “had a strong finish to the year, delivering full-year comparable RevPAR growth of 3.3% and net hotel rooms growth of 7.0%, fueled by a record-setting 71 new hotels added to our system in 2017.”
Fourth quarter 2017: Net income increased 87.4% to US$76 million; adjusted EBITDA increased 4.0% to US$179 million; comparable systemwide RevPAR increased 3.8%, including an increase of 4.1% at comparable owned and leased hotels.
Full year 2017: Net income increased 22.3% to $249 million; adjust EBITDA increased 3.9% to US$816 million, up 4.0% in constant currency; comparable systemwide RevPAR increased 3.3%, including an increase of 0.9% at comparable owned and leased hotels; adjusted EBITDA margin decreased 70 basis points to 29.5%.
Hyatt opened a record 71 hotels during 2017, compared with 59 hotels in 2016; at year-end, the company’s pipeline totaled approximately 330 hotels or approximately 70,000 rooms. This compared to approximately 305 hotels or approximately 66,000 rooms as of December 31, 2016. Read the full report here.
“We believe we are well-positioned to execute our long-term growth strategy of maximizing our core business focused on high-end travelers, integrating new growth platforms and optimizing capital deployment,” Hoplamazian said. “Plans to sell roughly $1.5 billion of real estate by the end of 2020 are underway.”
Hyatt’s system-wide RevPAR growth of 3.8% (4.5% actual) easily exceeded our 2.0% estimate,” noted SunTrust’s Bellisario, “with particular strength in the Americas select-service segment and international markets. “Initial 2018 guidance appears to be in line with expectations, and overall, we expect investors will be squarely focused on the company’s asset sale plans, which Hyatt appears to be making good progress on, according to our industry contacts.”