During an earnings call to discuss Hilton Worldwide Holdings’ second quarter 2023 results, CEO Christopher Nassetta highlighted the company’s growth in the first half of the year—and suggested that, after announcing two brands in January and May, more were in development.
Spark by Hilton, the company’s new "premium economy" brand that launched in January, had approximately 60 hotels in the development pipeline as of June 30. “We're only going to open 20 [Spark hotels] this year,” Nassetta told investors during the call. “You should assume we're going to open a lot more than that next year.” In May, Hilton launched a new brand in the U.S. under the working title Project H3, an apartment-style extended-stay brand. “There's no way you could debate that every segment is important, but the mid-market is where the people are,” Nassetta said.
And while Hilton has done “a bunch of things in the lifestyle space,” including its LXR soft brand, Nassetta said the company does not have “a pure hard brand in the luxury lifestyle space. We will.” The company, he said, is actively doing developmental work in the luxury lifestyle space. “I would expect in the next year we'll launch something in that space to add to the three brands we have already in the luxury space.” The new brand, he added, would give Hilton “another shot on goal” for luxury opportunities around around the world.
By the Numbers
During the quarter, systemwide occupancy improved more than four points to reach 77 percent in June—“our highest level post pandemic,” Nassetta said during the call.
For the three months ended June 30, system-wide comparable revenue per available room increased 12.1 percent compared to the same period in 2022 due to increases in both occupancy and average daily rate, and management and franchise fee revenues increased 16.1 percent compared to the same period in 2022. For comparison to pre-pandemic results, system-wide comparable RevPAR for the three months ended June 30 increased 9.3 percent compared to the same period in 2019, and management and franchise fee revenues increased 30.8 percent from the same period in 2019.
For the six months ended June 30, system-wide comparable RevPAR increased 19.7 percent compared to the same period in 2022 due to increases in both occupancy and ADR, and management and franchise fee revenues increased 22.1 percent compared to the same period in 2022. For comparison to pre-pandemic results, system-wide comparable RevPAR for the six months ended June 30 increased 8.8 percent compared to the same period in 2019, and management and franchise fee revenues increased 28.7 percent from the same period in 2019.
Net income and adjusted earnings before interest, taxes, depreciation and amortization were $413 million and $811 million, respectively, for the quarter, compared to $367 million and $679 million, respectively, for the same quarter in 2022. Both exceeded the high end of the company’s previous guidance, and Nassetta noted that the EBITDA earnings were “the highest [for a] single quarter in our company's history.”
Net income and adjusted EBITDA were $622 million and $1.45 billion, respectively, for the first half of the year, compared to $578 million and $1.12 billion, respectively, for the first half of 2022.
Development
In the second quarter of 2023, Hilton opened 92 new hotels totaling 14,000 rooms for net unit growth of 11,200 rooms. The company added more than 36,000 rooms to the development pipeline during the second quarter—the largest quarterly signings in the company’s history, Nassetta noted.
As of June 30, Hilton's development pipeline totaled approximately 3,060 hotels representing 440,900 rooms throughout 116 countries and territories, including 29 countries and territories where Hilton did not have any existing hotels. Of the rooms in the development pipeline, 217,000 of the rooms were under construction—more than half—and 250,100 of the rooms were located outside of the U.S.
Outlook
For the remainder of 2023:
- Systemwide comparable RevPAR, on a currency neutral basis, is expected to increase between 10 percent and 12 percent compared to 2022.
- Net income is projected to be between $1,387 million and $1,422 million.
- Adjusted EBITDA is projected to be between $2,975 million and $3,025 million.
- Net unit growth is expected to be approximately 5 percent.
For the third quarter:
- Systemwide comparable RevPAR, on a currency-neutral basis, is expected to increase between 4 percent and 6 percent compared to the third quarter of 2022.
- Net income is projected to be between $395 million and $409 million.
- Adjusted EBITDA is projected to be between $790 million and $810 million