Hilton’s Nassetta ignores noise, bets better years ahead

McLEAN, Virginia – Geopolitical and economic turmoil “noise” be damned. Hilton President and CEO Chris Nassetta is willing to bet 2026 hotel performance will be better than 2025, and 2027 will be even stronger than 2026.

“I don’t have my head in the sand, but I like to try and lift up above noise,” Nassetta said on Hilton’s third quarter earnings call. “That’s sort of what I do my personal and professional life, and when I do that, it makes me feel pretty good about the next few years. So, I would bet a lot of money that 2026 is going to be better than 2025 and I bet a lot of money 2027 is going to be better than 2026.”

Nassetta had a lot to say on the call about the next few years as Hilton beat Street estimates with $976 million in adjusted EBITDA based on what analysts said were better than expected SG&A expenses, down 6% year-over-year.

We continue to believe that in the U.S. lower interest rates, a more favorable regulatory environment, certainty on tax policy and a significant investment cycle will result in accelerated economic growth and meaningful increases in travel demand.

Chris Nassetta

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Even better news from Hilton came from its pipeline report, up 5% year-over-year and better than 4% in the second quarter. Hilton raised its net unit growth slightly to 6.5 to 7.0% year-over-year. Nassetta added that he is confident about net unit growth between 6.0% and 7.0% over the next several years.

“I remain optimistic about the next few years. We continue to believe that in the U.S. lower interest rates, a more favorable regulatory environment, certainty on tax policy and a significant investment cycle will result in accelerated economic growth and meaningful increases in travel demand,” Nassetta said. “This, when paired with limited industry supply growth, should drive stronger RevPAR growth over the next several years.”

Nassetta based his optimism on multiple factors, especially in the U.S., which he said accounts for 75% of Hilton’s business. He suggested:

• Inflation is coming down, as are interest rates, which he believes will continue to drop.
• Certainty on tax policy, which he said will probably last for at least three to five years. Nassetta said tax policy will have meaningful benefits such as bonus depreciation and things that stimulate investment.
• A regulatory environment that is going to be much more friendly.
• An investment cycle that is coming but takes time to get embedded in the economy. Nassetta referenced the roughly $1.6 trillion infrastructure bill that is less than 20% spent and the $800 billion chips act that is less than 5% spent.
• AI investment and all the infrastructure that goes behind it, including energy, data centers.
• Comps getting a lot easier and better fundamentals that will make the numbers look all that much better.
• The midterm elections generally being good for business.
• The energy surrounding the 250th birthday of the United States, which is a year-round celebration.
• The World Cup, which is another extended event driving business for weeks.
• A supercycle of underdevelopment with less than 1% capacity growth versus 2% to 2.5% average over a 30-year span.

The AI wave

Nassetta also referenced the potential upside of artificial intelligence (AI) driving efficiencies and redefining a lot of processes that can translate into higher margins by reducing incremental system costs.

Recognizing the gross operating profit challenges owners face, he also referenced Hilton’s announced plans to reduce system fees to operate in the Hilton. He added that the reductions do not include royalty or license fees.

This has been a difficult time for the owner community in this air pocket where I think really good things are coming. But, at the moment, in the U.S. you’re seeing modestly negative top line. And while inflation has come down, it’s still a little bit elevated. That’s not good for our owner community and why we put this [reduced system fees] program in place.

Chris Nassetta

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“This has been a difficult time for the owner community in this air pocket where I think really good things are coming,” Nassetta said. “But, at the moment, in the U.S. you’re seeing modestly negative top line. And while inflation has come down, it’s still a little bit elevated. That’s not good for our owner community and why we put this program in place. But it’s also why we want to continue, as we’re in this transition period to faster growth, to utilize every weapon in our arsenal to drive efficiencies.”

Expanding on AI-related opportunities, Nassetta said there are 41 use cases being tested and utilized inside the company today, and he referenced three buckets of opportunities.

The first bucket is reinventing processes to garner efficiencies, which will benefit G&A and allow for repurposing of people to do “higher value things.”

The second bucket surrounds how Hilton goes to market and distributes its products. “We’re in the business of fulfillment,” Nassetta said. “We have a platform and a network, but in the end, we have 9,000 and growing hotels where we control rate, inventory and availability, and the only way you get it is through us. Okay, no other way. What I would argue is it is going to become a much more competitive environment for how consumers get information... It’s a bit of an arms race trying to figure out who the winners and losers are. Where it’s going is super good for us if we are intelligent about how we go to market and how we distribute our products, making sure we always deliver on the fulfillment side.”

The third bucket is the customer experience. Nassetta said Hilton is evolving its tech stack to create services and deliver a much better customer experience, meaning mass customization, understanding customers, being able to take all the data they’ve captured and enable teams on the property side to customize experiences, resolve problems in real time in a way that they never been able to do. “This isn’t a pipe dream... We’re doing it, testing and learning. And we think there’s a huge opportunity,” Nassetta said.

Third quarter numbers

Turning to development, during the third quarter, Hilton opened 199 hotels (24,000 rooms) and achieved net unit growth of 6.5%. Openings increased more than 35% year-over-year on an organic basis with luxury and lifestyle brands comprising approximately 20% of openings in the third quarter.

In Asia Pacific, Hilton announced plans to exceed 250 luxury and lifestyle hotels in the coming years, representing portfolio growth of more than 50%.

It’s a bit of an arms race [with AI] trying to figure out who the winners and losers are. Where it’s going is super good for us if we are intelligent about how we go to market and how we distribute our products, making sure we always deliver on the fulfillment side.

Chris Nassetta

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Conversions remain integral to Hilton’s growth story and Nassetta said they expect nearly 40% of openings in 2025 to be conversions across 12 of brands sourced from a mix of independent hotels and competitor brands.

Earlier this month, Hilton launched a lifestyle-focused soft brand called Outset Collection by Hilton. To date, Nassetta said they have more than 60 hotels in development with long-term growth potential of more than 500 hotels across North America alone. They will open the first several hotels in the collection in the fourth quarter.

In addition to strong openings, Hilton signed 33,000 rooms in the quarter, up over 25% year-over-year on an organic basis and increased its development pipeline to more than 515,000 rooms.

Hilton expects global new development starts to finish up nearly 20% and up over 25% in the U.S. year-over-year. Nonetheless, construction starts remain below 2019 levels.

On the performance side, U.S. RevPAR decreased 2.3% in the third quarter, largely driven by pressure across business transient and group. Holiday shifts, declines in government spend, portfolio renovations and international inbound demand also weighed on performance.

For full year 2025, Hilton expects U.S. RevPAR to be roughly flat versus 2024.

Outside the U.S., third quarter RevPAR increased 4.3% year-over-year, driven by strong demand in both leisure and group segments. For full year 2025, Hilton expects RevPAR growth to be in the mid-single digits in Europe, driven by rebounds in the U.K. and Ireland.

Third-quarter RevPAR growth in the Middle East and Africa region increased 9.9% year-over- year, driven by robust intra-regional travel growth for both business and leisure segments. For full year 2025, Hilton expects RevPAR growth in the high single-digit range.

In Asia Pacific, excluding China, third quarter RevPAR was up 3.8% led by strong group trends in Japan, Korea and South Asia. RevPAR in China declined 3.1% in the quarter, largely driven by slower business transient and group travel, particularly in tier two and tier three cities. For full year 2025, Hilton expects the region to be roughly flat.