While luxury demand has largely been the driver of hotel performance in recent history, Hilton President and CEO Chris Nassetta said that trend is now reversing and broad-based demand growth fueled a stronger-than-expected first quarter.
During Hilton's first-quarter earnings call, Nassetta said the "K-shaped economy" — with luxury hotels outperforming and economy hotels performing poorly — could be a thing of the past.
"We expect improving performance in the lower and [middle] chain scales with [revenue] strength continuing to move downstream from luxury and upper upscale toward a more balanced convergence demand shape, or what I have been calling a 'C-shaped economy,'" he said.
Hilton hotels saw systemwide revenue per available room increase 3.6% year over year in the first quarter, with Nassetta noting much of that demand came from further down the chain scales than the luxury demand that largely fueled performance in 2025.
Broadly across the first quarter, Hilton continued to get a sense of increasing strength in travel demand, he said.
"I love it when we're sitting around this very table every week talking about performance, and every time we talk, it's getting better," Nassetta said. "And that's what's been happening for awhile. For weeks and weeks, it's been getting better. As we look further out in the year with the visibility we have here in the U.S., it feels better."
When explaining why he foresees a prolonged period of broader travel demand, Nassetta reiterated points he's made over the course of the last year during earnings calls about why he believes the economy is setting up better for both consumers and businesses.
"You have a broad deregulatory regime, and that's in addition to the backdrop of the bill that was passed last year," he said, referring to the 2025 tax cuts in the U.S. "You are in a multiyear position where you have very, very business-friendly tax attributes, and that's very hard to get undone" even if there is a change in presidential administration.
Hilton now projects a 2% to 3% increase in revenue per available room for full-year 2026, compared to earlier projections of 1% to 2%. Hilton officials are also expecting net income of slightly more than $1.9 billion and adjusted earnings before interest, taxes, depreciation and amortization of slightly more than $4 billion.
Several analysts did, however, point to a slight decrease in expectations for the second quarter, which Hilton officials will see RevPAR growth of 2% to 3%, similar to the full year, and the reason seems to be continued disruption in the Middle East due to war in Iran.
Nassetta noted that prior to the conflict in that region, the Middle East had been among the best-performing parts of the world for Hilton. He added he's hopeful that things can normalize sooner rather than later, but the company's full-year projections account for a wide range of scenarios there.
"The Middle East creates some uncertainty, but I think you can make an argument that we're being reasonably conservative with our guidance," he said.
That region of the world accounts for roughly 3% of Hilton's total business, so losing a majority of the business in the region would have a material impact on its overall growth rate, Nassetta said. He added it's harder to parse out the spillover into other global regions.
"We've seen a little bit of that, with a little bit in India, particularly Bangalore, a little bit in the Seychelles and Maldives because of transit through Dubai, but not a lot," he said. "But we've assumed if it stays really bad, there will be a little bit more."
Unit growth
Net unit growth continues to be a strong point for Hilton broadly, with the company touting a growth rate of 6.3% in the first quarter.
Talking broadly about the company's prospects for growth, Nassetta said 1 in 5 hotels globally under construction carry Hilton flags, and he expects to lean on deals like the recently inked partnership with Yotel to be a new avenue for growth.
Partnering with Hilton can be compelling for what Nassetta termed "micro brands," noting those deals are structured the same as any other franchise portfolio deals the company signs.
"The way I think about it, Yotel is a great example of a great, smaller brand ... and customers love it. The quality is good. They have a real following, but they've had a real problem without having global scale and all the network effect that we have, along with the ability to invest in technology and all those things at the level we do to make it work the way they want it to work," he said. "So that was a unique opportunity for us to say 'We love it.' We did a lot of work, and we think our customers like it and it would resonate well."
Nassetta said he expects other small brands to "fold in over time" to the broader Hilton ecosystem.
Key openings in the quarter include the first two converted properties to the company's new Apartment Collection by Hilton taking reservations, with one in Atlanta and the other in Salt Lake City, and the Waldorf Astoria Rabat Salé in Morocco.
Quarterly performance
In addition to the 3.6% RevPAR increase for the quarter, Hilton brought in $2.9 billion in revenue, according to its earnings release.
The company also realized $383 million in net income during the first quarter, with $901 million in adjusted EBITDA.
Year to date, the company has repurchased almost $1.1 billion in stock.
As of press time, Hilton's stock was trading at $329.17 a share, up 12.4% year to date and up 48.6% year over year.