Hilton(HLT) - 2024 Q1 - Earnings Call Transcript

Financial Data and Key Metrics Changes - System-wide RevPAR increased by 2% year-over-year, which was at the low end of the guidance range due to renovations, inclement weather, and unfavorable holiday shifts [7][16] - Adjusted EBITDA for Q1 2024 was $750 million, up 17% year-over-year, exceeding the high end of guidance [16] - Diluted earnings per share adjusted for special items was $1.53 [16] Business Line Data and Key Metrics Changes - Leisure transient RevPAR exceeded expectations, driven by strength in international markets [7] - Business transient RevPAR across large corporates increased by more than 3%, supported by strong demand in consulting and government contracting [7] - Group RevPAR rose nearly 5% year-over-year, led by strong convention and social demand [7] Market Data and Key Metrics Changes - In the Americas outside the U.S., RevPAR increased by 7% year-over-year, with urban markets seeing a 10% growth [17] - Europe experienced a 10% year-over-year RevPAR growth, driven by strong performance across all segments [17] - The Middle East and Africa region saw a 15% increase in RevPAR year-over-year, attributed to both rate and occupancy growth [17] - Asia-Pacific RevPAR was up 8% year-over-year, with Japan and Korea leading in rate growth [18] Company Strategy and Development Direction - The company expects system-wide RevPAR growth of 2% to 4% for the full year, with positive growth across all major segments [8][19] - The development pipeline reached a record 472,000 rooms, up 10% year-over-year, with approximately 60% located outside the U.S. [10][18] - The company announced acquisitions to expand into lifestyle and experiences categories, including a controlling interest in Sydell Group and an agreement to acquire Graduate Hotels [11][12] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the resilience of the broader economy, with strong employment numbers and corporate profits [24] - The group business remains strong, with expectations for continued growth in business transient demand [24][35] - Management noted that while leisure demand is normalizing, pricing power remains strong, allowing for modest growth [24][35] Other Important Information - The company paid a cash dividend of $0.15 per share during Q1 2024, totaling $39 million, and plans to return approximately $3 billion to shareholders for the full year [21] - Hilton Honors occupancy reached a historical high of 64%, up over 300 basis points year-over-year, indicating strong customer engagement [70] Q&A Session All Questions and Answers Question: Guidance for the back half of the year - Management noted that the first quarter's RevPAR was lighter than expected but explained by more rooms under construction and holiday shifts impacting results [23][24] Question: Performance of lower-end chain scale segments - Management expects modest positive performance in lower-end segments, although they will be lower than higher chain scale segments [30] Question: Group and business transient performance relative to 2019 - Both segments are eclipsing revenue levels from 2019, but occupancy remains below 2019 levels, with expectations for recovery by the end of the year [33] Question: Regional performance insights - The U.S. is expected to be at the lower end of the RevPAR growth range, while Europe and Asia-Pacific are showing resilience [39][40] Question: Drivers of fee growth - Fee growth was driven by a mix of managed hotels, strong performance in license fees, and growth in the purchasing business [44] Question: Net unit growth and acquisitions - The company expects net unit growth of 6% to 6.5%, incorporating the impact of recent acquisitions [48] Question: Construction pipeline and financing challenges - The percentage of the pipeline under construction has increased, with challenges in labor and raw material costs remaining, but financing conditions are improving [52] Question: Impact of the Olympics on results - Management did not provide specific details on the anticipated impact of the Olympics on overall results [72]