Hilton Worldwide Holdings reported its first-quarter 2020 results today, which showed that despite the global reach of the company, COVID-19 did not have a significant effect on its business until March.
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According to Christopher J. Nassetta, Hilton’s president/CEO, the company is taking a number of steps to not only survive the pandemic, but to eventually thrive.
"We are currently experiencing unprecedented times as a result of the COVID-19 pandemic, and our No. 1 priority remains protecting the safety and security of our guests, team members and owners,” Nassetta said. “We have also taken precautionary measures to protect our business, including securing our liquidity position. Given the strength of our system and dedication of our people, we believe we are well-positioned to navigate this crisis and ultimately recover stronger."
According to the earnings report, Hilton's first-quarter results were not significantly impacted by the COVID-19 pandemic until March 2020, with the exception of the Asia Pacific region. Occupancy was roughly flat through February in the Americas and Europe, Middle East and Africa regions. As such, the results for the three months ended March 31, 2020, are not indicative of future results and the material negative impact that the COVID-19 pandemic is expected to have on Hilton's business for an indeterminate length of time.
For the three months ended March 31, 2020, systemwide comparable revenue per available room decreased 22.6 percent primarily as a result of decreases in occupancy, and management and franchise fee revenues decreased 18 percent. The decreases were due to the pandemic and the related reduction in global travel and tourism, which required the complete and partial suspensions of hotel operations at many of Hilton's properties.
For the three months ended March 31, 2020, diluted earnings per share was 6 cents and diluted EPS, adjusted for special items, was 74 cents compared to 54 cents and 80 cents, respectively, for the three months ended March 31, 2019. Net income and adjusted earnings before interest, taxes, depreciation and amortization were $18 million and $363 million, respectively, for the three months ended March 31, 2020, compared to $159 million and $499 million, respectively, for the three months ended March 31, 2019.
Development
In the first quarter of 2020, Hilton opened 67 new hotels, totaling 8,800 rooms, and achieved net unit growth of over 6,100 rooms. Additionally, during the quarter, Hilton signed the largest multibrand deal in company history with Resorts World Las Vegas for a 3,500-room resort uniting Hilton Hotels & Resorts, LXR Hotels and Resorts and Conrad Hotels and Resorts.
As of March 31, 2020, Hilton's development pipeline totaled nearly 2,670 hotels consisting of more than 405,000 rooms throughout 120 countries and territories, including 35 countries and territories where Hilton does not currently have any open hotels. Additionally, of the rooms in the development pipeline, 223,000 rooms were located outside the U.S., and 213,000 rooms were under construction.
Balance Sheet and Liquidity
As of March 31, 2020, Hilton had $9.6 billion of long-term debt outstanding, excluding deferred financing costs and discount, with a weighted average interest rate of 3.92 percent. Excluding finance lease liabilities and other debt of Hilton's consolidated variable interest entities, Hilton had $9.3 billion of long-term debt outstanding with a weighted average interest rate of 3.88 percent and no maturities until 2024.
Total cash and cash equivalents were $1,805 million as of March 31, 2020, including $71 million of restricted cash and cash equivalents. During the three months ended March 31, 2020, Hilton borrowed the remaining amount available under its $1.75 billion senior secured credit facility, as a precautionary measure in response to the COVID-19 pandemic. In April 2020, Hilton continued to take action to solidify its cash position, including the pre-sale of Hilton Honors points for $1 billion and the issuance of $1 billion aggregate principal amount of senior notes. Giving effect to these transactions, Hilton would have had $3.8 billion of cash, restricted cash and cash equivalents as of March 31, 2020.
During the first quarter of 2020, Hilton repurchased 2.6 million shares of its common stock at a cost of approximately $279 million and an average price per share of $107.26. Since the inception of Hilton's stock repurchase program in March 2017, Hilton has repurchased approximately 56.6 million shares of its common stock for approximately $4.4 billion at an average price per share of $78.40. In March 2020, Hilton's board of directors authorized an additional $2 billion for share repurchases under its stock repurchase program. The amount remaining under Hilton's current stock repurchase program is approximately $2.2 billion.
In March 2020, Hilton paid a quarterly cash dividend of 15 cents per share on shares of its common stock, for a total of $42 million. Hilton formally suspended share repurchases of its common stock and dividend payments on March 26, 2020, after the board of directors' additional share repurchase authorization, as a result of efforts to preserve capital and maintain liquidity. The stock repurchase program remains authorized by the board of directors, and Hilton may resume share repurchases in the future at any time, depending upon market conditions, capital needs and other factors. No share repurchases were made after March 5, 2020, through May 7, and no new cash dividends have been declared subsequent to the payment of the previously declared cash dividend.