Weak Business Transient Demand Offsets Hilton Gains in This autumn and Full-Year 2019: Business Travel News

Weaker than expected business transient demand muted Hilton Worldwide’s fourth-quarter and full-year 2019 results, according to the company. 

Systemwide fourth-quarter comparable revenue per available room was down 1 percent year over year “as weaker than expected business transient performance offset leisure gains,” said president and CEO Christopher Nassetta on an earnings call. Full-year 2019 RevPAR was up 0.8 percent compared to 2018, primarily driven by an increase in occupancy. 

Similarly, fourth-quarter U.S. RevPAR “fell 80 basis points as softer corporate spending pressured business transient,” said Hilton EVP and CFO Kevin Jacobs, adding that 2019 U.S. RevPAR grew 70 basis points “as solid marketshare gains and good group performance were somewhat tempered by weak business transient trends in the latter half of the year.”

Still, Nassetta noted that during the past “two to three weeks, we’ve started to see in terms of advanced business transient … [it’s] finally started to come back to life.” He stressed the comment was based on limited data early in the year, but “it’s gone from flat to wanting to be negative to showing positive growth.” Nassetta said he’s hopeful the trend will be sustained, although leisure and group growth are expected to outperform business transient for the year.

Fourth-quarter Hilton systemwide occupancy and average daily rate were flat and down 1 percent, respectively, year over year. Full-year occupancy increased 0.5 percent with ADR up 0.1 percent. 

Net income for the quarter was down nearly 22 percent from a year prior to $176 million. Total 2019 net income increased 15 percent to $886 million. 

Nassetta reported that the Hilton Honors loyalty program closed the year with more than 103 million members, who accounted for 64 percent of fourth-quarter occupancy. Hilton during the fourth quarter also launched its lifestyle Tempo by Hilton brand, which already has “60 deals in various stages of development,” Nassetta said. With three brands launched in 2019 and one so far in 2020, he noted that there was one more brand in the pipeline, a luxury lifestyle brand, but it would be a while before it would be introduced. “We’re not in a rush,” he said. “With the environment we are in, we want our teams focused on what we have launched and to get it going.” 

Regional Performance

The fourth quarter showed year-over-year ADR and RevPAR declines nearly across the board, with only Europe reporting a RevPAR gain, of 1.4 percent. The Americas outside of the U.S. showed a 3.2 percent RevPAR decline for the quarter, “largely driven by business transient weakness across Canada and Mexico,” Jacobs said. The Middle East and Africa RevPAR was down 4.3 percent, and Asia/Pacific reported a 3.8 percent decline as “slowing economic growth in China, trade tensions and protests in Hong Kong weighed on performance,” Nassetta said. For the year, Europe once again led RevPAR growth at 3 percent and reported ADR up 1.4 percent. 

Development

The company opened 18,500 rooms in the fourth quarter, adding to the 58,300 net additional rooms for the year, for a 6.6 percent net unit growth from Dec. 31, 2018. The openings bring the total number of hotels and rooms for the company to 6,110 and 971,780, respectively, across 119 countries and territories. Hilton also approved about 33,700 rooms for development during the quarter, growing the pipeline to 387,000 rooms as of Dec. 31, for a 6 percent increase year over year. More than 70 percent of the rooms under construction are located in international markets.

2020 Guidance and Coronavirus Outlook

Hilton estimates first-quarter 2020 guidance to show flat year-over-year RevPAR on a currency-neutral basis, with full-year 2020 coming in at flat to 1 percent growth. Net income is expected to range from between $192 million to $207 million for the quarter, and $979 million to $1.015 billion for the year. 2020 net unit growth is anticipated to be between 6 percent and 7 percent.

The outlook excludes any potential impact from the coronavirus outbreak. Nassetta said Hilton was carefully monitoring the situation and drawing on industry experience with SARS, which occurred in 2003 and 2004, and trying to estimate the impact on its business. Currently, about 150 hotels representing approximately 33,000 rooms are closed. For the full year, the company estimates a potential 100 basis point negative impact to company systemwide RevPAR growth, “assuming the closed hotels ultimately wind up being non-comp.”

RELATED: Hilton Q3 results




Source link

Leave a Reply

Your email address will not be published. Required fields are marked *