Hilton officials expect rebound after soft Q1
Hilton officials expect rebound after soft Q1
28 APRIL 2016 8:55 AM

Hilton Worldwide Holdings President and CEO Chris Nassetta said he expects strong growth for his company for the rest of 2016 following slower growth in the first quarter.

MCLEAN, Virginia—Hilton Worldwide Holdings President and CEO Chris Nassetta couldn’t wait for spring to arrive, both literally and figuratively.

While discussing Hilton’s first-quarter performance Wednesday morning, Nassetta said the larger economy fell under a “deep freeze” at the end of 2015 and early in 2016 that slowed growth in the hotel industry.

The industry wasn’t able to avoid the effects of lagging oil prices, worries about the Chinese economy and lingering security concerns in Europe after a series of terrorist attacks, Nassetta said.

“That scares people,” he said. “And the result of that, and we saw it dramatically, is people freeze … and economic growth numbers go down.”

But Nassetta said the economy, and the industry as a whole, have begun to “thaw,” and he believes there’s plenty of room left for optimism in 2016.

“The great thaw is on,” he said. “I’m not trying to be a Pollyanna here. There are things going on in the world that aren’t great, but relative to the end of last year and early this year, there is a heck of a lot more stability.”

Q1 performance
Hilton saw systemwide comparable revenue per available room grow 2.1% year over year to $99.42 during Q1, which EVP and CFO Kevin Jacobs noted was at the low end of company’s guidance for the first quarter. Hilton managed to exceed expectations with adjusted earnings before interest, taxes, depreciation and amortization, which grew 9% to $653 million.

Hilton has seen occupancy drop 0.3% to 70.2% systemwide while average daily rate grew 2.5% to $141.62. Total revenues for the quarter grew from $2.6 billion in 2015 to $2.8 billion.

Despite a soft Q1, Hilton officials said they’re maintaining their guidance of 3% to 5% RevPAR growth for full-year 2016. Nassetta said the overall numbers will be bolstered by strong group business and rebounding corporate transient. He said the company has already seen a rebound to start the second quarter.

“April feels pretty darn good relative to what we experienced in the first quarter,” Nassetta said.

As of press time, Hilton stocks were trading at $22.20, a year-to-date increase of 3.8%. The Baird/STR Hotel Stock Index was trading at $3,200.01, an increase of 3.5% year to date.

REIT leadership
Hilton’s plans to spin off two portions of its overall business took a big step forward Wednesday with the announcement of a CEO and a CFO for a planned real estate investment trust. Hilton officials announced plans to spin off their owned properties as a REIT early in the year and also plan to spin off their time share business.

Thomas Baltimore, Jr. will take over as president and CEO of the REIT after serving in the same position with RLJ Lodging Trust.

Nassetta said Baltimore was exactly what Hilton officials were hoping for with the position.

“I’ve known Tom for 30 years,” Nassetta said. “And he was not just on the list—he was the number one person on the list. We couldn’t be more pleased that he was willing to provide leadership for our new REIT.”

Sean Dell’Orto will move from his position as Hilton Worldwide’s SVP and treasurer to work as CFO for the REIT.

Growth of Tru
Hilton officials said their pipeline remains strong for the year, particularly bolstered by the recently launched Tru by Hilton brand.

Nassetta said that brand was initially announced with 130 properties signed, and since then the company’s team has been signing more at a furious pace, averaging roughly one more signed per day.

“It’s largely been driven by existing Hampton owners,” he said, describing the Tru launch as the fastest in U.S. history.

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