Hilton Worldwide Holdings Inc (HLT)

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. -