Solid operating performance in 2Q keeps Hilton ahead of
estimates; bolt-ons like Graduate and partnership with SLH drives peer-leading net
unit growth.
McCLEAN, Virginia – Hilton Worldwide Holdings Inc. beat 2Q24 Street estimates
with solid operating fundamentals and strong net unit growth (+100 bps) driven
by the closing on the acquisition of Graduate Hotels and better-than-expected
conversion of Small Luxury Hotels of the World properties.
Hilton guided a bit lower for the rest of 2024 with RevPAR
growth guidance -100 bps at the high end (now 2.0%-3.0%). Also, the high end of
Adjusted EBITDA is -$20 million (-60 bps), which R.W. Baird analyst Michael
Bellisario said implies a slightly larger implied 2H24 reduction given the 2Q24
earnings beat. For 3Q24, Hilton is guiding to 2.0%-3.0% RevPAR growth.
Hilton reported RevPAR growth of 3.5% year-over-year for 2Q
with U.S. RevPAR coming in at +1.4%. Hilton attributed the increase to both
occupancy and ADR increases, and a 10% increase year-over-year in management
and franchise fee revenues. For the six months ended June 30, 2024, systemwide
comparable RevPAR increased 2.8% compared to the same period. Bellisario also
noted that Hilton has only ~3% earnings exposure to a currently soft China
market.
Looking forward to the rest of the year, with the continued growth of our existing brands, as well as the addition of our new brands and strategic partner hotels, we expect net unit growth of 7.0 percent to 7.5 percent for the full year.
Christopher Nassetta
“We are pleased to report a solid second quarter, with an
increase in RevPAR of 3.5%, driven by growth in all segments, with particularly
strong group performance,” said Hilton President and CEO Christopher Nassetta. “On
the development side, we ended the quarter with a record development pipeline,
up 15% from the prior year and up 8% sequentially from the first quarter,
including strategic partner hotels. Looking forward to the rest of the year,
with the continued growth of our existing brands, as well as the addition of
our new brands and strategic partner hotels, we expect net unit growth of 7.0
percent to 7.5 percent for the full year.”
Hilton added 18,000 net rooms in 2Q24 (6.2% net unit growth
y/y), which includes ~5,400 Graduate rooms and six AutoCamp properties (469
rooms). The company signed/approved 62,700 rooms, or 44,500 rooms ex-strategic
partner arrangement hotels – a quarterly record. Overall, Hilton’s development pipeline
totaled 3,870 hotels representing 508,300 rooms, growing 15% from June 30, 2023,
and 8% from the prior quarter. Fully, 251,800 rooms were under construction in
2Q and 298,800 rooms were located outside of the U.S.
Bellisario did note that adjusted for the Graduate and SLH
deals comparable net unit growth midpoint declined ~70 bps. “Overall, we do not
view Hilton's update as thesis-changing, and earnings estimates likely will be
plus/minus unchanged, which is relatively better than peers,” he said.
Notably, the first NoMad hotel joined Hilton’s portfolio in
the quarter, the NoMad London. They also opened 27 Spark by Hilton hotels
during the quarter, including our first Spark hotel in the United Kingdom. Some 400 SLH hotels joined the Hilton system, as well.
Other highlights:
- Total fees were $850 million.
- Diluted EPS was $1.67 for the second quarter, and diluted
EPS, adjusted for special items, was $1.91
- Net income was $422 million for the second quarter
- Adjusted EBITDA was $917 million for the second quarter
- Repurchased 3.5 million shares of Hilton common stock during
the second quarter, bringing total capital return, including dividends, to $761
million for the quarter and $1.774 billion year to date through August
- Full year net income is projected to be between $1.532 billion
and $1.555 billion; full year Adjusted EBITDA is projected to be between $3.375
billion and $3.405 billion
- Full year 2024 capital return is projected to be
approximately $3.0 billion