During Hilton’s Q4 and 2021 earnings call, President and CEO Christopher J. Nassetta said the company had made “significant progress” in its recovery during the course of the year. That overall momentum has continued into 2022, manifesting itself in the form of capital returns to shareholders.
“As we look to the year ahead, we're optimistic that our industry leading [revenue per available room] premiums and fee-based capitalized business model coupled with further demand recovery will continue to drive strong performance and meaningful free cash flow, which will enable us to return significant capital to shareholders in a disciplined way,” Nassetta said on Hilton’s first-quarter earnings call. “With recent performance exceeding our expectation we were pleased to have resumed our capital return program earlier than anticipated, beginning share repurchases in March. Through April we have completed approximately $265 million of buybacks. Additionally, we have declared a 15 cent per-share quarterly dividend, further highlighting the confidence in continued recovery and the strength of our model.”
In May 2022, Hilton's board of directors authorized a quarterly cash dividend of 15 cents per share of common stock. For the year, the company expects to return $1.4 billion to $1.8 billion to shareholders in the form of buybacks and dividends.
RevPAR and EPS
For the three months ended March 31, 2022, systemwide comparable RevPAR increased 80.5 percent compared to the same period in 2021, due to increases in both occupancy and ADR, and fee revenues increased 79 percent compared to the same period in 2021. For comparison to prepandemic results, systemwide comparable RevPAR for the three months ended March 31, 2022, was down 17 percent compared to the three months ended March 31, 2019.
For the three months ended March 31, 2022, diluted earnings per share was 75 cents and diluted EPS, adjusted for special items, was 71 cents compared to minus-39 cents and 2 cents, respectively, for the three months ended March 31, 2021. Net income (loss) and adjusted earnings before interest, taxes, depreciation and amortization were $211 million and $448 million, respectively, for the three months ended March 31, 2022, compared to minus-$109 million and $198 million, respectively, for the three months ended March 31, 2021.
Demand
“Despite a choppy start to the year given omicron-related demand pressures, trends picked up meaningfully month over month with RevPAR declines versus 2019 improving approximately 17 percentage points from January to March, down only 9 percent to 2019 [and] driven by acceleration across all segments,” Nassetta said. “In March, systemwide rates were up 3 percent compared to 2019.”
Strong leisure transient trends continue to boost weekend performance with RevPAR in the quarter exceeding 2019 levels and rates up approximately 9 percent versus previous peaks, he said. Acceleration in business transient and group trends drove meaningful improvement midweek. U.S. business transient RevPAR increased sequentially versus the fourth quarter with march down only 9 percent compared to 2019 levels. In March, revenue from large accounts was just 12 percent below 2019.
Overall business transient now comprises 45 precent of total segment mix, 10 points shy of prepandemic levels. For April, overall U.S. transient booked revenue for all future periods was up 17 percent versus 2019 levels with rates up 10 percent.
“On the group side, social and smaller events continue to leave recovery while demand for company meetings and conventions improved meaningfully throughout the quarter. In March, total group RevPAR was more than 75 percent of 2019 levels, improving approximately 25 points versus January,” according to Nassetta. “Additionally, group revenue booked in the first quarter for all future periods was down just 4 percent relative to 2019 levels and total lead volume for all future periods was up 3.5 percent compared to 2019.”
Development
In the first quarter of 2022, Hilton opened 76 new hotels with 13,200 additional rooms and achieved net unit growth of 7,800 rooms. During the quarter, Hilton celebrated the opening of the 500th Homewood Suites in the U.S., as well as other notable openings including the Hilton Singapore Orchard, Hilton's largest hotel in the Asia Pacific region; and two new lifestyle hotels in destination cities under its Canopy by Hilton brand, the Canopy by Hilton Boston Downtown and the Canopy by Hilton New Orleans Downtown.
As of March 31, 2022, Hilton's development pipeline totaled 2,730 hotels representing more than 410,000 rooms throughout 113 countries and territories, including 27 countries and territories where Hilton does not currently have any existing hotels. Additionally, of the rooms in the development pipeline, nearly 200,000 of the rooms were under construction and over 245,000 of the rooms were located outside the U.S. Adding to Hilton's development pipeline during the quarter were two notable international deals under its Curio Collection by Hilton brand, the Royal Palm Galapagos in Ecuador and the Palacio Bellas Artes San Sebastian in Spain.
Looking Forward
Nassetta said the company is optimistic about performance the rest of the year.
“Positive momentum has continued into the second quarter with April RevPAR tracking at roughly 95 percent of 2019 levels,” he said. “While macro risks and uncertainty exists, forecasts for economic growth remain healthy. Additionally, our ability to reprice rooms in real time creates a natural inflation hedge. We think there is a good likelihood that we'll reach 2019 systemwide RevPAR levels during the third quarter.”
For the full year, the company expects leisure RevPAR to exceed 2019 peak levels given excess consumer savings, a strong job market and pent-up demand.
“We expect business transient to be roughly back to 2019 levels by year end, with expectations supported by rising corporate profits, rebounding demand from big businesses and loosening travel restrictions,” Nassetta said. “On the group side we expect RevPAR to be at approximately 90 percent of 2019 levels by year end as demand for company meetings and convention business accelerates into the back half of the year.”