Hilton reported its fourth-quarter and full-year 2023 results on Wednesday, but it was its new partnership with Small Luxury Hotels that it looked to underscore and a rumored acquisition of Graduate Hotels that it tried to avoid.
Net income reached $150 million for the fourth quarter and was $1.15 billion for the full year. System-wide comparable RevPAR increased 5.7% and 12.6% for the fourth quarter and full year, respectively, compared to the same periods in 2022.
Business transient recovery continued in the quarter with RevPar up more than 4%. This was led by gains in both rate and occupancy, as leisure transient RevPAR increased 3%, decelerating modestly versus the third quarter, largely due to seasonality compared to 2019
Group RevPAR rose 6% in Q4 versus the same time last year due to an uptick in small company meetings and convention demand, said CEO Chris Nassetta.
In the quarter, Hilton approved 33,800 new rooms for development, bringing its development pipeline to a record 462,400 rooms as of the end of 2023, representing 11% YOY growth. It added a record 24,000 rooms to the system in the fourth quarter, resulting in 62,900 room and 395 hotel openings for the full year, contributing to net-unit growth of 4.9%. Notably, Hilton opened Signia by Hilton Atlanta in Q4, the city’s largest ground up development in over 40 years.
Conversion activity remained strong, accounting for 30% of openings.
“As we look to the year ahead, we expect system-wide top-line growth of 2% to 4% versus 2023,” said Nassetta. “We expect performance to be driven by continued growth across all major regions with international markets modestly outpacing the U.S. We also expect positive RevPAR growth across all segments, driven by continued recovery in business transient and group, coupled with steady leisure demand. “We expect continued recovery in small company meetings and large association and convention business to drive strong group performance for 2024.
“We do think that by the time we finish this year, assuming a reasonably soft landing, we’ll be at more normalized levels of demand. And we believe given very low supply numbers that are continuing and continued decent economic growth, that we’re gonna continue to have pricing power here and everywhere else.”
Hilton announced a strategic partnership with Small Luxury Hotels of the World (SLH), which will allow the more than 180 million Hilton Honors members the ability to book, accrue points and burn points at the some 560 SLH hotels worldwide, if a SLH hotel decided to participate. The partnership will expands Hilton’s luxury breadth and complements Hilton’s other luxury brands, Waldorf Astoria Hotels & Resorts, Conrad Hotels & Resorts and LXR Hotels & Resorts brands, which total around 100 hotels globally.
“This partnership will meaningfully expand our luxury distribution as we expect to add the majority of SLH’s over 500 hotels to our system and further enhance our powerful network effect, giving our guests even more opportunities,” Nassetta said, touting SLH’s high concentration in resort destinations and what he called “unique, hard-to-duplicate places around the world.”
Hilton will only derive revenue on the partnership when a SLH property is booked through a Hilton channel.
I Heard a Rumor
Two days prior to Hilton’s Q4 call, a Bloomberg article, citing an unnamed source, reported that Hilton was in talks to acquire Graduate Hotels, a collection of more than 30 university-located hotels, owned by AJ Capital Partners, which started the brand in 2014.
Hilton traditionally has launched brands organically, steering clear of M&A. Newer brands launched include the premium-economy conversion brand Spark by Hilton and LivSmart Studios by Hilton, a lower-midscale extended-stay offering.
Prompted by analysts to discuss the rumored Graduate buy, Nassetta didn’t take the bait, but did offer his own spin on M&A. “Our attitude on M&A is really the same as it’s always been. We haven’t done any, but every time I’ve ever been asked, I’ve said ‘never say never,'” Nassetta said. “But we have a very tough filtration system: Is something additive from the standpoint of the portfolio brands that we have? Can it be done in a way that’s accretive to the value of the company.”
In the some 17 years Nassetta has been with the company, he said he has looked “at pretty much everything” and that “nothing has passed through the filter.”
Though not addressing Graduate explicitly, there was a small hint given that there is some “there there.”
“The environment we’re in is a little bit different,” Nassetta continued, citing interest rates and more stress in the system than normal. “That probably presents more opportunity to do things like this that are quite modest—sort of tuck-in acquisitions.”
Beyond Blackstone acquiring then later selling Hilton, the company’s likely most important acquisition was its 1999 buy of Promus Hotel Corporation, which landed it the DoubleTree, Hampton Inn, Embassy Suites brands.