Hilton(US:HLT)2019-02-13 22:16Financial Data and Key Metrics Changes - In Q4 2018, system-wide RevPAR grew 2% year-over-year on a currency-neutral basis, at the lower end of guidance due to softer leisure demand [16] - Adjusted EBITDA for the quarter was $544 million, exceeding guidance and increasing 12% year-over-year [16] - Management franchise fees increased 14% to $532 million, surpassing the expected range of 9% to 11% [17] - Full year 2018 adjusted EBITDA was $2.08 billion, with diluted earnings per share adjusted for special items at $0.79 [16][17] Business Line Data and Key Metrics Changes - Group RevPAR grew nearly 4% in Q4, exceeding expectations, while corporate transient RevPAR was up 2.6% for the year [6][16] - Leisure transient RevPAR also increased by 2.6% for the year but fell short of expectations due to calendar shifts and softer demand [6][16] - The company opened over 450 hotels in 2018, achieving net unit growth of nearly 57,000 rooms, or approximately 7% year-over-year [8] Market Data and Key Metrics Changes - In the U.S., Q4 comparable RevPAR grew 1.1%, driven entirely by ADR growth, while full year 2018 U.S. RevPAR grew 2.2% [17] - In the Asia Pacific region, RevPAR increased 3.4% in Q4, with full year 2018 growth at 6.5%, largely driven by strength in China [20][21] - Europe saw Q4 RevPAR growth of 7.2%, with full year growth at 6.9%, driven by strong transient trends in London and Vienna [19] Company Strategy and Development Direction - The company aims to continue expanding its global footprint, with over half of its pipeline located outside the U.S. and significant growth opportunities in Asia Pacific [9] - The focus remains on building a presence in markets where guests want to travel, with a strategic approach to development [9][10] - The company is enhancing its Honors program and leveraging technology to drive direct relationships with guests [12][13] Management's Comments on Operating Environment and Future Outlook - Management expects modestly slower trends in 2019 compared to 2018, with RevPAR guidance adjusted to 1% to 3% [7][21] - The macroeconomic indicators support generally favorable fundamentals, although uncertainties in international markets are acknowledged [7] - Management remains optimistic about the future, anticipating strong net unit growth and significant free cash flow generation [14] Other Important Information - The company returned $1.9 billion to shareholders in 2018 through buybacks and dividends, representing approximately 9% of its market cap [5][22] - For 2019, the company expects to return between $1.3 billion and $1.8 billion to shareholders [22] Q&A Session Summary Question: Pipeline and room growth - Management noted that the pipeline was up 6% year-over-year, with a combination of strong deliveries and cleaning up underperforming projects affecting the sequential decrease [26] Question: Softness in leisure transient demand - Management attributed the decline in leisure transient demand to trade war issues, a slower economy in China, and weather-related disruptions [29] Question: Capital return guidance - Management explained the wider range for capital return in 2019 is based on leverage profile considerations and potential market opportunities [34] Question: Pipeline in China - Management expressed confidence in the pipeline in China, noting a shift towards mid-market opportunities and continued growth despite economic slowdowns [39] Question: Luxury portfolio development - Management highlighted progress in the luxury segment, with a growing number of properties and a focus on aspirational brands [44] Question: Market share gains in China - Management indicated that strong market share growth in China is driven by excellent property locations and disciplined market strategies [50] Question: Direct booking channels - Management reported that web-direct channels are the fastest growing, significantly outpacing OTA channels [57] Question: Conversions in challenging environments - Management noted an increase in conversions during tougher market conditions, supported by a broader range of brands available for conversion [70]