Hilton Reports ‘Significant Lift’ in Forward Bookings and Occupancy

Business Transient, Group Demand Grows

Virgin Hotels Las Vegas reopened in January 2021 following extensive renovations as part of Curio Collection by Hilton. The 1,500-key property is owned by JC Hospitality LLC in partnership with Juniper Capital Partners, Virgin Group and more. (Hilton)
Virgin Hotels Las Vegas reopened in January 2021 following extensive renovations as part of Curio Collection by Hilton. The 1,500-key property is owned by JC Hospitality LLC in partnership with Juniper Capital Partners, Virgin Group and more. (Hilton)

Hilton CEO and President Chris Nassetta is laser-focused on the future and spent significant time on the company’s first quarter 2021 earnings call with analysts talking about the forward demand momentum the company sees for the rest of the year.

“While recovery varies by region and country, we can see the light at the end of the tunnel in the U.S. … and as a result, we’re seeing a significant lift in forward bookings and occupancy, which is now around 60%, as well as lengthening booking windows,” he said.

Leisure demand continues to fuel the recovery fire. Nassetta said Hilton’s “April bookings for the summer [in the U.S.] are exceeding 2019 peak levels by nearly 10%.”

With increased visibility into the factors affecting business transient and group travel, he said Hilton is seeing “a slow shift back to a more normal mix of business.”

“We expect continued corporate office reopenings to drive meaningful pickup in business transient demand toward the back half of the year, based on what we’ve seen in China and pockets of the U.S. where restrictions are lifted.”

Nassetta said those U.S. states that lifted restrictions earlier than others saw business transient revenue reach roughly 75% of 2019 levels in the first quarter of 2021.

Even group business is becoming clearer as group bookings made in the first quarter for the back half of 2021 are “roughly flat with 2019 booking levels," he said.

In the first quarter, leisure room nights booked were close to 90% of 2019 levels, Nassetta said. Business transient room nights were at about 50% of 2019 levels while group was at about 35% to 40% of 2019 levels.

While group events happening now continue to be driven by social events and smaller meetings, he said, “Corporate group leads are up more than 70% for future periods.”

“As we look out to next year, our group position is roughly 85% of peak 2019 levels with rate increases, versus 2019,” he said.

Still, Nassetta said that while demand is on a positive return trajectory, and in some cases may reach peak 2019 levels, “we don’t think rate will be back to 2019 levels.” He attributed the lag to what the industry often calls lower-value business, or business booked at typically lower rates.

As a result, revenue-per-available-room levels each month compared to 2019 moving forward will get better, he said. By the end of the year, Hilton could be back around 70% of 2019 levels on a run-rate basis.

That isn't all the way home, he said, "but it is a heck of a lot better than where we were."

Global Performance in the Quarter

Systemwide comparable revenue per available room decreased 38.4% in the first quarter from the same period in 2020, according to the company's earnings release.

In the U.S., RevPAR dropped nearly 37% year over year, and 50% versus the same period in 2019. March occupancy was 62% higher than January occupancy, ending at 55%, which represents the highest level since the pandemic began, Hilton CFO Kevin Jacobs said.

In the Americas outside the U.S., first quarter RevPAR declined 55% year over year and 63% compared to the same quarter in 2019.

Europe RevPAR fell 76% year over year and 82% versus 2019. The Middle East and Africa region saw RevPAR drop 32% year over year in the first quarter and 46% compared to 2019. In the Asia-Pacific region, first quarter RevPAR fell 7% year over year and 49% compared to 2019.

In China specifically, RevPAR increased 64% year over year, with occupancy increasing from roughly 35% to 65% during the first quarter, Jacobs said.

In terms of more comprehensive industrywide RevPAR recovery, Nassetta reiterated what he’s said publicly on a number of occasions that he believes it will happen “in 2023 or 2024.”

“With the slope of recovery we’re on, I’d probably be on the earlier end of that since we have a little more visibility,” he said. “There’s a chance from a room rate point of view that we get back next year, but I think to get both room night and rate and the compression we need, which requires the bigger groups to be back … that takes some time.”

Development Growth

Hilton approved 21,900 new rooms for development during the first quarter, bringing its development pipeline to 399,000 rooms as of March 31. The current pipeline includes 31 countries and territories new to Hilton; 241,000 rooms are located outside the U.S. and 204,000 are under construction.

Hilton added 16,500 rooms in the first quarter, contributing 13,100 net additional rooms, representing approximately 5.8% annualized net unit growth from March 31, 2020.

Notable openings in the quarter include the company’s 100th Curio Collection by Hilton, the 1,500-room Virgin Hotels Las Vegas, as well as the 50th Tapestry Collection by Hilton property.

The company executed a management agreement for the first Signia by Hilton, a 975-room, new-construction project in Atlanta.

Also on the development front, Hilton struck an exclusive management license agreement with Country Garden to develop Home2 Suites by Hilton properties in China.

As of April 28, 97% of Hilton’s hotels were open around the world.

Conversions represented about 24% of hotel additions in the quarter, and Jacobs said that activity will “continue to pick up over time,” though likely not get into last cycle’s range of “around 40% of overall deliveries.”

While Hilton did not issue an official growth outlook, Jacobs said the company continues to expect net unit growth of 4.5% to 5% in 2021 and over the next several years.

At press time, Hilton’s stock was trading at $123.86, up 11.3% year to date. The NYSE Composite Index was up 12.7% for the same time period.

Editor's Note: Chris Nassetta serves on CoStar Group's board of directors.