Hilton Worldwide (HLT) 7 Aug 24 2024 Q2 Earnings call transcript

Hilton Worldwide Holdings Inc. recently reported a robust second-quarter performance, surpassing expectations with strong RevPAR growth across all major segments. The company's adjusted EBITDA and adjusted EPS also exceeded the high end of its guidance. This positive momentum is attributed to a successful development strategy, a strong group position, and a focus on lifestyle segment expansion.

Development and Expansion

Hilton opened 165 hotels in the quarter, achieving a net unit growth of 6.2%. The company marked significant milestones, including the opening of its 6,000th hotel in North America and the debut of Curio and Croatia and DoubleTree in Malta. Hilton also welcomed graduate hotels into its family of brands, expanding its lifestyle offerings and accelerating its growth in the fast-growing lifestyle segment. With a pipeline of approximately 508,000 rooms, up 15% year-over-year, Hilton is well-positioned for substantial growth over the next several years.

Financial Performance

The company reported system-wide RevPAR growth of 3.5% year-over-year, driven by strong international performance and continued recovery in group. Adjusted EBITDA was $917 million in the second quarter, up 13% year-over-year. This growth was attributed to better-than-expected fee growth and a strong U.S. RevPAR performance. For the full year, Hilton expects RevPAR growth of 2% to 3%, with adjusted EBITDA of between $3.375 billion and $3.405 billion.

Market Position and Challenges

Hilton's brand value continues to shine, with Brand Finance ranking Hilton as the most valuable hotel brand for the ninth consecutive year. The company also topped the list of the top workplace in the U.S. for millennials for the seventh consecutive year. Despite these accomplishments, Hilton faces challenges, particularly in China, where RevPAR declined 5% in the quarter due to domestic travel restrictions and limited international inbound travel. China, however, remains a significant market, with travel activity showing signs of recovery.

Future Outlook

Hilton's outlook for the full year is optimistic, with a net unit growth expectation of 7% to 7.5%. The company is focusing on converting existing hotels to its brands, particularly in the lifestyle segment, and has seen significant success with Spark by Hilton, which has doubled its existing supply in just one year. Hilton is also expanding its strategic partnerships, including with Small Luxury Hotels of the World (SLH) and AutoCamp, to broaden its network and enhance the guest experience.

In conclusion, Hilton's strong second-quarter performance and strategic initiatives demonstrate its resilience and ability to navigate market challenges. The company's focus on development, brand expansion, and customer experience position it for continued growth and success in the future.