Dive Brief:

• During a Wednesday earnings call with analysts, Hilton CFO Kevin Jacobs credited solid international performance and continued strength in group travel for Q1 results that exceeded the company’s expectations. 
• The company posted net income of $268 million and adjusted EBITDA of $750 million in the quarter, while continuing to build its record development pipeline, adding 29,800 rooms for a total of 472,300 under development. 
• Hilton made several moves to further bolster that pipeline in Q1, particularly in the growing lifestyle segment, with acquisitions of the Graduate Hotels and NoMad brands and a partnership with glamping company AutoCamp. 

Dive Insight:

Hilton posted year-on-year RevPAR growth of 2% for the first quarter, “in the low end of our expected range,” due to inclement weather in the Northeast as well as an earlier-than-usual Easter holiday, CEO Chris Nassetta said during the call. Despite this, bottom-line financial results “meaningfully” exceeded the company’s expectations, Nassetta said. 

Jacobs and Nassetta credited Hilton’s performance in part to the company’s record development pipeline. Roughly 40% of rooms in development are in the U.S. 

Pipeline growth spanned all chain scales, though the upper-midscale Hampton, notably, celebrated the milestone opening of its 3,000th property in March. Nassetta also pointed to luxury and lifestyle growth on the call, calling out the 433-room Conrad Orlando that opened in January. 

Conversions accounted for 30% of Hilton’s openings in the quarter, led by its DoubleTree and Spark by Hilton hotels. 

Hilton also expanded its pipeline with acquisitions and partnerships in Q1, most notably through the acquisition of the Graduate Hotels brand and the purchase of a controlling stake in Sydell Group to expand the luxury lifestyle NoMad hotel chain. On the call, Nassetta said he expects the majority of forthcoming NoMads to be new-builds, with the potential to expand to more than 100 “high-end markets.” 

Hilton also partnered with AutoCamp in Q1, which Nassetta said will offer more options to guests who “prioritize exploration and adventure.” Overall, Nassetta said Hilton sees its growing presence in the lifestyle category as a way to build customer loyalty.

The CEO also provided an update on Hilton’s partnership with Small Luxury Hotels of the World, which the company announced during its Q4 2023 earnings call in February. Properties in the SLH network have to opt in to join Hilton’s network and the Hilton Honors loyalty program, but Nassetta said a “very very high percentage of SLH members” have already signed up.

Though RevPAR in the quarter was above pre-pandemic levels, analysts on the call pointed out that occupancy and demand in the quarter still trail that of 2019, some suggesting permanent changes in business transient demand. Nassetta countered, saying he believes business transient demand will grow steadily. 

Nassetta noted that business transient demand stemming from large corporations is lower than that from small- and medium-sized businesses, but “what we're hearing from our big corporate customers is that they're traveling more, so that is coming back,” he said.