A strong earnings report that included 5.7% RevPAR growth
and 5.5%-6% guidance for unit growth in 2024 included an announced affiliation
to give loyalty members more luxury options.
McLEAN, Virginia – While Hilton didn’t announce the rumored acquisition of AJ
Capital’s Graduate Hotels during its fourth quarter earnings report on
Wednesday, it did make a splash by announcing a partnership with Small Luxury
Hotels of the World (SLH) to expand its presence in the luxury space. The deal
will allow Hilton customers to book, earn and redeem loyalty points for stays
at participating properties in the SLH community of 560 luxury boutique hotels
spanning 90 countries, predominantly in Europe.
Hilton CEO Chris Nassetta said he expects most SLH members to join the program but growth will depend on how rapidly its members join. He added that there will be almost no overlap on locations with a heavy concentration on luxury resorts. SLH and its members will get paid on the business they generate.
In response to questions about the Graduate Hotel acquisition rumor, Nassetta said the company's attitude on M&A has been consistent and remains the same, adding that the "filtration system" has so far kept M&A out for Hilton. But he hedged by saying the environment now is different than before.
Hilton delivered strong 4Q23 performance with 5.7% RevPAR
growth due to increases in both occupancy and ADR; management and franchise fee
revenues increased 12.2% compared to the same period in 2022; adjusted EPS of
$1.68; and adjusted EBITDA of $803 million – all beating Street expectations.
For comparison to pre-pandemic results, systemwide comparable
RevPAR for the three months ended December 31, 2023, increased 13.5% compared
to the same period in 2019, and management and franchise fee revenues increased
38.5% from the same period in 2019.
We view this strategic partnership as a big win for Hilton (and a loss for Hyatt, which had the exclusive loyalty alliance for the last ~five years).
Michael Bellisario
Nassetta said Hilton delivered more
openings in the fourth quarter than any other quarter in the company's history (24,000
rooms resulting in 62,900 room openings for the full year, a 4.9% increase
versus 2022) and achieved record signings for the year, meaningfully ahead of
pre-pandemic levels. “We expect this momentum to continue into 2024 and net
unit growth to accelerate to the high end of our guidance range of 5.5% to 6%,
with the opportunity for further upside of 25 to 50 basis points from our
exclusive partnership with Small Luxury Hotels of the World.
Hilton added 33,800 rooms to the development pipeline during
the fourth quarter, contributing to 130,200 rooms added for the full year,
which was approximately a 45% increase from the prior year. As of December 31,
2023, Hilton's development pipeline totaled approximately 3,270 hotels
representing 462,400 rooms throughout 118 countries and territories, including
30 countries and territories where Hilton had no existing hotels. The pipeline total
represents an 11% year-over-year increase.
Additionally, of the rooms in the development pipeline,
216,600 were under construction and 259,800 were located outside of the U.S.
Commenting on the SLH partnership, R.W. Baird analyst
Michael Bellisario wrote, “We view this strategic partnership as a big win for
Hilton (and a loss for Hyatt, which had the exclusive loyalty alliance for the
last ~five years).” Hilton said more details about the program will be
forthcoming.
Full year 2024, Hilton projects systemwide RevPAR to
increase between 2% and 4% on a comparable and currency neutral basis compared
to 2023; full year net income is projected to be between $1,694 million and
$1,729 million; full year adjusted EBITDA is projected to be between $3,330
million and $3,380 million. Full year 2024 capital return is projected to be
approximately $3 billion.
Bellisario commented that 204 RevPAR growth came in as
expected and adjusted EBITDA shows upside coming from the higher 2023 earnings
base.