Hilton Worldwide Holdings Inc. is a leading global hospitality company with a diverse portfolio of 24 world-class brands, operating over 8,300 properties and more than 1.25 million rooms across 138 countries and territories . The company primarily engages in managing and franchising hotels, as well as owning and leasing hotel properties. Hilton generates revenue through management and franchise fees, licensing fees, and sales from its owned and leased hotels . The company is focused on expanding its global hotel network and enhancing guest experiences through technology and its loyalty program, Hilton Honors, which boasts over 200 million members .
- Management and Franchise - Manages hotels for third-party owners and licenses Hilton's intellectual property to franchised hotels, generating revenue from management and franchise fees, as well as licensing fees from strategic partners .
- Ownership - Operates consolidated owned and leased hotels, deriving revenue from nightly hotel room sales, food and beverage sales, and other services .
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What went well
- Hilton achieved record net unit growth of 7.8%, opening more hotel rooms than any other quarter in the company's history, driven by strong international expansion, particularly in China where approvals, starts, and opens are expected to be up this year .
- The company's brands are performing exceptionally well, leading to an outsized amount of conversions and increased market share, which is now significantly higher than competitors. Owners are confident in Hilton's ability to deliver strong returns over long-term relationships .
- Recent strategic acquisitions, such as the Graduate Hotels and the integration of Small Luxury Hotels of the World properties, have been immediately accretive to earnings and are enhancing customer engagement, providing unique luxury experiences, and expanding Hilton's offerings globally .
What went wrong
- RevPAR growth is slowing and has underperformed expectations: In the third quarter, system-wide RevPAR increased only 1.4% year-over-year, below Hilton's guidance range due to factors like slower ramp in September, weather impacts, and ongoing labor disputes in the U.S. Adjusted RevPAR growth was 2.3%, slightly softer than the second quarter.
- Significant decline in RevPAR in China impacting Asia Pacific performance: Third quarter RevPAR in Asia Pacific decreased by 3% year-over-year, with China's RevPAR declining 9% due to difficult domestic travel comparisons and disruptions.
- Leisure demand is normalizing with potential downward pressure on rates and occupancy: Leisure trends continued to normalize, with RevPAR declining modestly from post-pandemic peaks. There may be less pricing pressure in leisure segments, particularly on weekends, as demand might be flat or decreasing.
Q&A Summary
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2025 EBITDA Target and RevPAR Outlook
Q: Is the $3.69B 2025 EBITDA target still achievable?
A: Yes, Hilton's CEO, Christopher Nassetta, expressed confidence that the $3.69 billion EBITDA target for 2025 is achievable despite industry RevPAR growth estimates of 1–2%. He believes that 2025 will look a lot like 2024, with solid economic growth and resilient macro conditions leading to similar RevPAR growth. He expects a balance of same-store growth and unit growth to drive results, stating, "I am very confident that algorithm will be alive and well for 2025." -
Net Unit Growth Guidance and Assumptions
Q: Can you walk us through the assumptions behind the 6–7% NUG guidance?
A: Hilton expects 6–7% net unit growth for next year, driven organically with about one-third from conversions. They feel good about this range as they have significant visibility into projects under construction and conversions in the pipeline. Any variation would likely come from the conversion space, depending on the number of additional conversion opportunities they secure. -
Visibility on Business Transient and Leisure Demand
Q: How does your visibility on business and leisure demand compare to 2019?
A: Hilton's visibility on business transient and leisure demand remains limited to 60–90 days out, similar to 2019 levels. While they have better listening posts and data from customers, actual booking visibility hasn't materially changed. Their outlook relies on macroeconomic consensus and anecdotal evidence from customers, with group bookings providing the most visibility due to their stickiness. -
Outsized Conversion Growth
Q: How is Hilton achieving an outsized amount of conversions?
A: Hilton attributes its success in conversions to being scrappy and gritty, building strong relationships, and most importantly, delivering superior performance. Their brands are performing well, and market share is at its highest, which instills confidence in owners investing in long-term relationships. They focus on generating returns for owners, which drives their outsized share of conversions. -
Impact of Macro Environment on Development and RevPAR Index
Q: Is a slower RevPAR backdrop better for your business?
A: While Hilton prefers higher RevPAR, a slower RevPAR environment has benefits. In challenging conditions with less financing available, Hilton disproportionately gains more conversions and new construction due to its strong brands. They continue to deliver better market share and resilience, expecting to achieve circa 10% EBITDA growth even in the current environment. This resilience is a testament to their model's strength. -
International Unit Growth and China
Q: Where are the key opportunities for international expansion, especially in China?
A: Hilton's pipeline is about 55% outside the U.S., with around 80% of projects under construction internationally. They see significant growth opportunities in Asia Pacific, particularly in China, India, and the Middle East. In China, despite macroeconomic slowdowns, Hilton expects approvals, starts, and openings to be up, leveraging adaptive reuse projects. They adapt their brands to local markets while maintaining their essence and positioning. -
Group Business Dynamics
Q: What's driving the continued strength in group bookings?
A: The strength in group bookings is broad-based, including increased citywide conventions, strong social group business, and robust corporate meetings demand. Big citywide events are picking up after a period of limited activity, and companies are scheduling more meetings to foster innovation and culture in a post-remote work environment. This diverse demand supports sustained group booking growth. -
SLH Partnership Impact
Q: How is the SLH partnership performing?
A: Though still early, the SLH partnership is showing promising results. Customers are engaging with the new luxury properties added to Hilton's system, with strong interest and healthy redemption usage. As many SLH properties are resorts booking well in advance, Hilton expects to see more significant benefits in the upcoming spring and summer seasons, enhancing offerings for high-end leisure customers. -
Key Money Guidance
Q: Has there been a change in key money usage or guidance?
A: There is no change in Hilton's approach to key money. They continue to use it on less than 10% of deals, primarily when necessary due to competition. The reduction in key money guidance this quarter is due to timing, with some projects likely shifting to next year. Last year was heavier due to strategic projects, and this year's spend will be lighter. -
Occupancy and Rate Strategy
Q: Has your approach to pushing rate over occupancy shifted recently?
A: Hilton's approach has not materially changed in recent months. Despite inflation moderating, it remains above target levels, providing continued pricing power. Hilton expects to maintain strong rate integrity across most segments, leveraging their revenue management systems to optimize pricing. They anticipate solid pricing pressure to persist due to macroeconomic conditions. -
Fees per Room Mix Stability
Q: Has the fee per room mix changed with the development pipeline?
A: Hilton is not seeing any change in fees per room. The overall mix remains consistent, with the majority of development occurring in brands that command the highest fees. They continue to see strong long-term growth in fees per room, supported by RevPAR growth, contract renewals, and licensing fee increases. -
ROI Targets for Brand Development vs. Acquisitions
Q: What are your ROI targets for developing brands internally versus acquiring them?
A: Hilton typically achieves near-infinite ROI when developing brands internally, making it the preferred approach. However, recent tuck-in acquisitions were strategically targeted and acquired under favorable conditions, making them immediately accretive to earnings. These acquisitions were specific to Hilton's strategic needs and allowed them to capitalize on market opportunities.
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Given that RevPAR growth came in below your guidance due to softer ramp in September and ongoing macro uncertainties, how confident are you in achieving your 2025 EBITDA target without exceeding the 1%-2% RevPAR growth range many in the industry are forecasting?
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You mentioned that conversions accounted for a significant portion of your net unit growth; can you elaborate on the sustainability of this trend and how you plan to maintain such high levels of conversions in the face of increasing competition?
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With over 80% of your pipeline under construction being outside the U.S., particularly in markets like China that have faced economic slowdowns and real estate issues, what risks do you see to your net unit growth targets if these markets don't recover as expected?
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As you expand aggressively internationally, how are you adapting your brands to different markets, and what challenges have you faced in maintaining brand standards and performance across diverse regions?
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Regarding your recent tuck-in brand acquisitions like Graduate Hotels and the partnership with Small Luxury Hotels of the World, can you quantify the initial impact on earnings and discuss how these investments align with your ROI targets compared to developing brands internally?
Q3 2024 Earnings Call
- Issued Period: Q3 2024
- Guided Period: Q4 2024 and FY 2024
- Guidance:
- Q4 2024 Guidance:
- System-wide RevPAR Growth: 1% to 2%
- Adjusted EBITDA: $804 million to $834 million
- Diluted EPS Adjusted for Special Items: $1.57 to $1.67
- FY 2024 Guidance:
- RevPAR Growth: 2% to 2.5%
- Adjusted EBITDA: $3.375 billion to $3.405 billion
- Diluted EPS Adjusted for Special Items: $6.93 to $7.03
- Net Unit Growth: 7% to 7.5%
- Capital Return: Approximately $3 billion to shareholders .
- Q4 2024 Guidance:
Q2 2024 Earnings Call
- Issued Period: Q2 2024
- Guided Period: Q3 2024 and FY 2024
- Guidance:
- Q3 2024 Guidance:
- System-wide RevPAR Growth: 2% to 3%
- Adjusted EBITDA: $875 million to $890 million
- Diluted EPS Adjusted for Special Items: $1.80 to $1.85
- FY 2024 Guidance:
- RevPAR Growth: 2% to 3%
- Adjusted EBITDA: $3.375 billion to $3.405 billion
- Diluted EPS Adjusted for Special Items: $6.93 to $7.03
- Net Unit Growth: 7% to 7.5%
- Capital Return: Approximately $3 billion to shareholders .
- Q3 2024 Guidance:
Q1 2024 Earnings Call
- Issued Period: Q1 2024
- Guided Period: Q2 2024 and FY 2024
- Guidance:
- Q2 2024 Guidance:
- System-wide RevPAR Growth: 2% to 4%
- Adjusted EBITDA: $890 million to $910 million
- Diluted EPS Adjusted for Special Items: $1.80 to $1.86
- FY 2024 Guidance:
- RevPAR Growth: 2% to 4%
- Adjusted EBITDA: $3.375 billion to $3.425 billion
- Diluted EPS Adjusted for Special Items: $6.89 to $7.03
- Net Unit Growth: 6% to 6.5% (excluding planned acquisition of Graduate Hotels)
- Capital Return: Approximately $3 billion to shareholders .
- Q2 2024 Guidance:
Q4 2023 Earnings Call
- Issued Period: Q4 2023
- Guided Period: Q1 2024 and FY 2024
- Guidance:
- Q1 2024 Guidance:
- System-wide RevPAR Growth: 2% to 4%
- Adjusted EBITDA: $690 million to $710 million
- Diluted EPS Adjusted for Special Items: $1.36 to $1.44
- FY 2024 Guidance:
- RevPAR Growth: 2% to 4%
- Adjusted EBITDA: $3.33 billion to $3.38 billion
- Diluted EPS Adjusted for Special Items: $6.80 to $6.94
- Net Unit Growth: Expected to accelerate to the higher end of 5.5% to 6% with potential upside of 25 to 50 basis points from partnership with Small Luxury Hotels of the World
- Capital Return: Approximately $3 billion to shareholders .
- Q1 2024 Guidance:
Competitors mentioned in the company's latest 10K filing.
- Accor S.A. - Mentioned as a primary global competitor in the hospitality industry .
- Choice Hotels International - Mentioned as a primary global competitor in the hospitality industry .
- Hongkong and Shanghai Hotels - Mentioned as a primary global competitor in the hospitality industry .
- Hyatt Hotels Corporation - Mentioned as a primary global competitor in the hospitality industry .
- Intercontinental Hotel Group - Mentioned as a primary global competitor in the hospitality industry .
- Marriott International - Mentioned as a primary global competitor in the hospitality industry .
- Radisson Hotel Group - Mentioned as a primary global competitor in the hospitality industry .
- Wyndham Hotels & Resorts - Mentioned as a primary global competitor in the hospitality industry .
Recent developments and announcements about HLT.
Corporate Leadership
Leadership Change
Michael W. Duffy is leaving his position as Senior Vice President, Chief Accounting and Risk Officer at Hilton Worldwide Holdings Inc. to pursue an opportunity outside the company. His departure is effective February 7, 2025, and is not due to any disagreement with the company . Misha Moylan will step up to assume the responsibilities of the principal accounting officer in the role of Senior Vice President, Chief Accounting Officer. Moylan has been with the company since 2010 and has served as head of Internal Audit since September 2019 .