Hilton Q3 earnings largely unaffected by flat RevPAR

Umbral, Curio Collection by Hilton, Mexico City
Hilton opened 118 hotels during the third quarter, including the Umbral, Curio Collection by Hilton in Mexico City. Photo credit: Hilton

Hilton released its third quarter earnings today, revealing softer than anticipated revenue per available room; adjusted earnings before interest, taxes, depreciation and amortization on the higher end of its expectations; and continued system growth.

Despite predicting systemwide RevPAR growth of between 1 and 2 percent in its second-quarter report, the company saw the metric inch up only 0.4 percent. In a call with investors, Kevin Jacobs, Hilton's EVP/CFO, attributed this modest increase to weaker transient demand in the United States and slower than expected Chinese leisure travel.

Hilton predicted systemwide RevPAR to be roughly flat year over year in the fourth quarter. For the full year, it estimated it would come in approximately 1 percent higher compared to 2018. President/CEO Christopher Nassetta predicted 2020 RevPAR growth will be between 0 and 1 percent.


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Though Hilton experienced soft RevPAR growth, it reported a strong adjusted EBITDA. The metric grew 9 percent YOY to $605 million. This places the company on the higher end of the expectations it offered a quarter ago ($590 million to $610 million). According to Jacobs, this performance “was primarily driven by greater cost control.”

For the fourth quarter, Hilton projects an adjusted EBITDA between $563 million and $583 million. Looking at the full year, it predicted the metric will fall approximately $2.3 million.

In an email with investors, Michael Bellisario, a senior research analyst at RW Baird, said “As investors remain focused on the company's growth algorithm and the bottom line's decreasing reliance on robust RevPAR growth, which was once again proven out this quarter (at least versus guidance/expectations), cash flow conversion/growth remains key.”

System Growth

According to Nassetta, 2019 will mark Hilton’s fifth consecutive year of net unit growth above 6 percent. During the third quarter alone, the company opened 118 hotels totaling approximately 17,400 rooms and achieved net unit growth of 15,600 rooms. The company predicts it will see net unit growth of approximately 6.5 percent for full-year 2019.

“Developer appetite for our brands remains strong and we expect to deliver another year of record signings of over 115,000 rooms and record construction starts of more than 87,000 rooms, which supports our net unit growth outlook for the next several years,” Nassetta said during the investor call. In the United States specifically, he said both signings and starts are tracking “moderately ahead” of expectations—starts are forecast to grow nearly 20 percent for the full year.

As of Sept. 30, Hilton’s development pipeline totaled more than 2,530 hotels consisting of nearly 379,000 rooms. Of that number, 205,000 were located outside the United States and 198,000 were under construction.

“Our robust development story remains a key driver of our continued success in delivering value beyond the broader fundamentals,” said Nassetta.