Hilton kicked off earnings season reporting net income of $268 million for the first quarter. System-wide comparable RevPAR increased 2%, which was toward the low end of the company’s expected range. In the quarter, Hilton approved 29,800 new rooms for development, which pushes the company’s development pipeline to a record 472,300 rooms as of March 31, 2024, representing a growth rate of 10% year-over-year.
Chris Nassetta, president and CEO of Hilton, mainly touted the company’s spate of new partnerships, which ultimately will help its net unit growth move to a range of 6% to 6.5%. RevPAR coming in at the low end of its guidance was partially blamed on renovations, inclement weather and unfavorable holiday shifts. “Leisure transient RevPAR exceeded our expectations even with tough year-over-year comparisons,” Nassetta said, though there is an acknowledgment of waning occupancy that could further erode RevPAR should rates not keep up.
As it looks toward the rest of the year, Nassetta said the expectation is for RevPAR growth of 2% to 4%, with the U.S. towards the low end of the range and “continued strength in international markets.”
One of the bright spots was group travel and performance, which came in at the high end of the range. For the full year, group position is up 13% versus last year, Nassetta said. “Between SMBs versus big corporate, the small medium businesses are already demand wise over and the big corporates are under, but we had big growth relative to a quarter that was more leisure oriented. We’re hearing from our big corporate customers they’re traveling more. So that is coming back.”
In the quarter, Hilton we opened more than 100 hotels totaling ~17,000 rooms and achieved net unit growth of 5.6%. Conversions accounted for 30% of openings, largely driven by DoubleTree and Spark by Hilton. In the quarter, Hilton also opened the Conrad Orlando and introduced the Waldorf Astoria and Canopy brands to the Seychelles. It also opened its 800th hotel in Asia Pacific and opened its 3,000th Hampton. We are confident that the best is yet to come for this iconic brand,” Nassetta said.
Beyond conversions, new construction starts “outperformed expectations” Nassetta said, up roughly 45% versus last year. Approximately half of Hilton’s pipeline is under construction. “If you look at the broader system, because of the relative strength of this economy and many other economies around the world, there is a desire to continue to expand their businesses and we feel good about what’s going on in the financing environment,” Nassetta said.
He also spotlighted several tuck-in additions and partnerships Hilton recently consummated. These include its controlling interest in Sydell Group, which allows it to expand the Nomad brand from its existing London location. “We have a great pipeline building,” Nassett said of it.
Hilton also announced an agreement with AJ Capital to acquire the Graduate Hotels brand that currently number 30 hotels globally in college and university towns. Nassetta said the brand has runway to be as large as 500 hotels. Other deals were made with AutoCamp and Small Luxury Hotels of the World, allowing its Hilton Honors members more ways to experience and use points. “These offerings provide incredible opportunities to further accelerate our growth and enhance our network effect by broadening and deepening our customer offerings in some of the industry’s fastest-growing markets and segments,” Nassetta said.