Hilton Reports Strong Q2 Business Transient Performance, No Signs of Weakness
Hilton Worldwide’s second-quarter business transient revenue again surpassed pre-pandemic levels, a trend the company expects to continue along with further strength in international markets and group demand, Hilton president and CEO Christopher Nassetta said Wednesday during an earnings call.
Strong demand drove continued pricing power across all segments, which the company expects will continue as “We’re not seeing any signs of weakness,” Nassetta said.
“Business transient keeps grinding up and getting better, and the same with group,” he said, adding that leisure demand growing at a slower pace, but that is only due to comps against “crazy highs.” That demand is now coming back down to “not even Earth. … our universe,” Nassetta said.
Business transient revenue per available room grew 11 percent year over year, up 6 percent over 2019, “as trends continue to normalize,” Nassetta said. In Q2, Hilton’s systemwide RevPAR increased 12.1 percent year over year to $122.02, up more than 9 percent over 2019. Hilton’s second-quarter average daily rate was up 5.9 percent year over year to $163.47. Systemwide occupancy in Q2 improved 4.2 percentage points year over year to 74.6 percent.
In June, systemwide occupancy reached 77 percent, “our highest level post-pandemic,” Nassetta said.
Group Shines, Big Corporates to Return
Group recovery remained “robust,” in Q2 with RevPAR growing 19 percent year over year, Nassetta said.
Hilton executives have high expectations for the group business through the year, as the company had its best booking quarter in its history in Q2. There is still “huge amounts of pent-up demand,” in group that haven’t been fulfilled, according to Nassetta.
“Our sales team saw the largest revenue bookings in our history for all future arrival periods,” for group, Nassetta said.
Group occupancy levels, however, “are still building,” due to some lagging city centers and pricing, Nassetta said. Hilton has been pushing hard on price due to a “higher inflationary environment,” and as a “yield management strategy,” Nassetta said. “It’s a better outcome for us,” he added, explaining that higher rates may drive down occupancy, but it’s better for the company’s bottom line.
And despite those rates, there is still more business to come, according to Hilton. While the “big corporates” are only “92 percent back” to traveling, Nassetta said, in the next year “they will come back no matter what.”
Additional Q2 Results and Pipeline
Hilton’s Q2 U.S. occupancy was 75.9 percent, up 1.3 percentage points year over year. Hilton’s Q2 U.S. ADR was $169.31, up 3.8 percent year over year, while RevPAR was $128.51, up 5.6 percent year over year.
Hilton looks to its robust pipeline for future revenue growth, with signings “up over previous watermarks,” aided by 60 hotels signed to “premium economy” brand Spark, executives said on the call.
Additionally, Hilton has more than 3,000 properties in the pipeline, most of which are conversions, and has “more rooms under construction than any other hotel company,” Nassetta said. Hilton’s U.S. pipeline increased 3 percent year over year.
Hilton’s second-quarter total revenue was $2.66 billion, up from $2.24 billion in the same time period in 2022. The company reported net income of $413 million in the second quarter, up from $367 million in 2022.
Angelique Platas www.businesstravelnews.com