Hilton kicked off what promises to be a rocky earnings season for hotel companies by touting strong profitability growth amid a weak environment for travel demand and hotel revenue.
In the third quarter, revenue per available room fell 1.1% for the international hotel brand company but Hilton still saw net income of $421 million — up from $344 million in the same quarter the year prior — and $976 million in adjusted earnings before interest, taxes, depreciation and amortization, an 8% year-over-year improvement.
Hilton President and CEO Chris Nassetta pointed to calendar shifts and a weak economy as headwinds for travel in the third quarter.
"Unfavorable holidays and events, softer international inbound to the U.S., declines in U.S. government-related travel and portfolio renovations weighed on results in the quarter," he said.
Leisure travel remains slightly more resilient than business transient, Nassetta said. Hilton did manage some gains in group pace despite a 4% fall in group RevPAR in the third quarter.
He added Hilton will continue to outperform on profitability given the company's track record.
"We've been super disciplined forever on costs since we've gone public," Nassetta said. "If you look at us versus core competitors relative to our size and scale, we've always been pretty efficient, and I believe we will continue to be."
Longer term, Nassetta said he sees greater opportunities to cut costs using artificial intelligence.
"There are a lot of tools available to us to continue to drive efficiencies, and we're going to use those," he said. "In the world of AI redefining a lot of processes, there are opportunities to continue to do things more efficiently and be able to accomplish more with less."
While the potential for AI in the hotel industry has been a popular talking point in recent years, Nassetta said it's more of a reality today than ever before.
"This isn't a pipe dream that I'm thinking about," he said. "We're doing it. We're testing. We're learning, and we think there's a huge opportunity."
Long-term optimism
While the hotel industry is broadly more likely to end 2025 on a low note than a high one, Nassetta said there are still plenty of reasons to feel optimistic looking further out.
"I don't have my head in the sand, but I like to try and lift up above the noise," he said. "That's sort of what I do in my personal and professional life. And when I do that, it makes me feel pretty good about the next year. So I would bet a lot of money that '26 is going to be better than '25, and I'd bet a lot of money '27 is going to be better than '26. The exact slope of that is difficult to determine."
Easier year-over-year comparisons, elections and major events such as the FIFA World Cup spread across North American markets are among Nassetta's reasons for optimism for 2026.
The World Cup "isn't like the Super Bowl where it's a weekend, it's a fairly extended sort of experience," he said. "So all of those things are going to be good."
There's also plenty of opportunities for growing Hilton's unit count and fees, particularly as Hilton continues to get "much greater than our fair share" of conversion interest from hotel owners, Nassetta said.
The outlook for new hotel construction should improve significantly in coming years, most notably because the current status quo of historically low supply growth can't last forever, he added.
"You're still in a super cycle of underdevelopment in the industry where you're adding capacity at less than 1% against a 2.5% 30-year average," he said.
Third-quarter performance
During the third quarter, Hilton recorded drops in both occupancy and average daily rate, down 0.5 percentage points and 0.5% year over year, respectively.
Nassetta said the drop in rates is less about pricing integrity than the types of business Hilton hotels are getting in the door.
"If you dissect it, it's really been a mix shift that's affected rate," he said. "You're just taking lower-rated customers and they're substituting for higher-rated customers. You're taking leisure customers that pay less ... it's a lower rate that you're substituting in for business transient, which is a higher rate. So when you deconstruct it scientifically, I feel pretty good that rate integrity has been reasonably good."
Hilton is projecting 1% RevPAR growth in the fourth quarter and flat to 1% growth in that metric for the full-year 2025.
Hilton brought in $3.1 billion in total revenues in the quarter, up from $2.9 billion during the same period of 2024.
The company also opened 199 hotels in the quarter, adding a net 23,200 rooms. Key openings include the Conrad Hamburg and the Kromo Bangkok, Curio Collection by Hilton.
As of press time, Hilton's stock was trading at $277.49, up 12.3% year to date. The New York Stock Exchange composite was up 12.8% for the same period.