The first quarter of 2024 was a big one for Hilton: In March, the company announced the planned acquisition of the Graduate Hotels brand, including the expected addition of approximately 35 franchised hotels to its portfolio in the second quarter. A month later, Hilton acquired a controlling financial interest in the Sydell Group, which owns the NoMad brand, marking Hilton's debut in the luxury lifestyle space and driving further luxury expansion opportunities.
“Graduate presents a unique opportunity to serve more guests, especially in markets where we're not present today,” Hilton President and CEO Christopher Nassetta said during the company’s earnings call with investors. “With thousands of colleges and universities around the world, we believe the addressable market for the brand is 400 to 500 hotels globally.”
CFO Kevin Jacobs noted strong growth potential for the NoMad brand. “There's a reason why we wanted to partner with them/take a controlling interest in that company,” he said. While the brand is currently small, he emphasized its name recognition within the industry. “We think that brand will compete really effectively, combined with our engines and the strength of our system, with the other luxury lifestyle brands that are out there.” Ultimately, Jacobs expects the brand to reach 100 properties in the future.
By the Numbers
For the quarter, systemwide revenue per available room increased 2 percent year-over-year on a currency-neutral basis, which Nassetta credited to increases in both occupancy and average daily rate. Nassetta also noted this growth was at the low end of the company’s guidance range. “Renovations, inclement weather and unfavorable holiday shift weighed on results more than we anticipated,” he said.
Net income was $268 million for the first quarter, while adjusted earnings before interest, taxes, depreciation and amortization was $750 million. In comparison, net income was $209 million while adjusted EBITDA was $641 million for the three months ended March 31, 2023.
Development
Hilton added 106 hotels with 16,800 rooms to its system in the quarter for 14,200 net additional rooms, contributing to net unit growth of 5.6 percent from the end of Q1 2023. Conversions accounted for 30 percent of openings, largely driven by the DoubleTree and Spark brands.
“In the quarter, we signed [nearly] 30,000 rooms, increasing our pipeline to a record 472,000 rooms, up 2 percent from last quarter and up 10 percent year over year,” Nassetta said. “Signings meaningfully outperformed our expectations driven by strength in international markets.” Of the rooms in the development pipeline, 229,700—about half—were under construction and 267,900 were located outside of the U.S.
As of March 31, Hilton's development pipeline totaled approximately 3,380 hotels throughout 119 countries and territories, including 31 countries and territories where Hilton previously had no existing hotels.
Jacobs noted the popularity of the new economy Spark brand, which opened its first property in October, less than a year after the brand launched. “Spark is going to be really disruptive,” he predicted. “You're bringing a brand to a segment that we haven't been in before. You're combining the strength of our engines with a brand that’s new and innovative and can be really disruptive in that space.”
Forecast
Without including the Graduate Hotels acquisition, Hilton expects domestic systemwide comparable RevPAR, on a currency-neutral basis, to increase between 2 percent and 4 percent year-over-year, which Nassetta noted is “towards the low end of the range.” He also predicted “continued strength” in international markets. Net income is projected to be between $1.58 billion and $1.62 billion, while adjusted EBITDA is projected to be between $3.37 billion and $3.42 billion.
For the second quarter alone, Hilton expects net income to be between $443 million and $457 million and adjusted EBITDA to be between $890 million and $910 million.