Hilton’s efforts to expand both up the chain scale—through its partnership with Small Luxury Hotels of the World and acquisition of the NoMad brand—and down the chain scale with the growth of its Spark economy brand appears to be paying off in the first half of 2024.
In July, Hilton launched its partnership with Small Luxury Hotels of the World, with 400 SLH hotels joining its system. The pace of initial property signups is “far exceeding” the company’s expectations, President and CEO Christopher Nassetta said during a call with investors. “Under our strategic partnership, we added nearly 300 boutique luxury properties to our system in July, with an additional 100 properties expected to join later this year.”
The first NoMad hotel, the NoMad London, also joined Hilton’s portfolio during the quarter.
Hilton also opened 27 Spark hotels in the quarter, more than doubling its existing supply. The brand also made its European debut with the opening of the Spark by Hilton London Romford nine months after the first property opened in the U.S. More than 95 percent of the conversions are from third-party brands, CFO Kevin Jacobs said, declining to specify which brands were converting to Sparks. The performance of the hotels, he added, has been “quite strong … maybe even a little bit better than what we've expected.”
Revenue and Earnings
For the three months ended June 30, systemwide comparable revenue per available room increased 3.5 percent compared to the same period in 2023 due to increases in both occupancy and average daily rate. Management and franchise fee revenues increased 10 percent compared to the same period in 2023.
For the six months ended June 30, systemwide comparable RevPAR increased 2.8 percent compared to the same period in 2023 due to increases in both occupancy and ADR, while management and franchise fee revenues increased 12 percent compared to the same period in 2023. Net income and adjusted earnings before interest, taxes, depreciation and amortization were $422 million and $917 million, respectively, for the three months ended June 30, compared to $413 million and $811 million, respectively, for the three months ended June 30, 2023. Net income and adjusted EBITDA were $690 million and $1.66 billion, respectively, for the six months ended June 30, compared to $622 million and $1.45 billion, respectively, for the six months ended June 30, 2023.
Development
In the second quarter of 2024, Hilton opened 165 hotels, totaling 22,400 rooms, resulting in 18,000 net room additions for net unit growth of 6.2 percent. During the quarter, the company continued to expand its lifestyle portfolio through its acquisition of the Graduate brand, adding 32 hotels to the system with another four in the pipeline.
Internationally, the company debuted three Portuguese properties—the Duo Hotel Lisbon, Curio Collection by Hilton; the DoubleTree by Hilton Lagoa Azores; and the Legacy Hotel Cascais, Curio Collection by Hilton.
In total, the company added 62,700 rooms to the development pipeline during the second quarter, and, as of June 30, its development pipeline totaled 3,870 hotels with 508,300 rooms, growing 15 percent from June 30, 2023 and 8 percent from the prior quarter. These pipeline hotels were located in 136 countries and territories, including 39 countries and territories where Hilton had no existing hotels, with 251,800 rooms under construction and 298,800 rooms located outside of the U.S. In July, Hilton’s system surpassed 8,000 hotels globally.
Outlook
Hilton “tempered” the high end of its expectations compared to prior guidance due to “softer trends in certain international markets and normalizing leisure growth more broadly,” Nassetta said. At the same time, Nassetta predicted growth for all of Hilton’s segments. “It'll be very, very low in leisure transient, but positive.”
Full Year 2024
Systemwide comparable RevPAR, on a currency neutral basis, is projected to increase between 2 percent and 3 percent compared to 2023.
Net income is projected to be between $1.53 billion and $1.55 million.
Adjusted EBITDA is projected to be between $3.37 billion and $3.40 billion.
Contract acquisition costs and capital expenditures, excluding amounts reimbursed by third parties, are projected to be between $250 million and $300 million.
Capital return is projected to be approximately $3 billion.
General and administrative expenses are projected to be between $415 million and $430 million.
Net unit growth is projected to be between 7 percent and 7.5 percent.
Third Quarter 2024
Systemwide comparable RevPAR, on a currency neutral basis, is projected to increase between 2 percent and 3 percent compared to the third quarter of 2023.
Net income is projected to be between $435 million and $448 million.
Adjusted EBITDA is projected to be between $875 million and $890 million.