Smaller Group Meetings Driving Business, Hilton Says

Signia by Hilton Atlanta will serve as the Georgia World Congress Center Authority headquarter hotel. (Hilton Worldwide)

Hilton Worldwide Holdings' first quarter 2021 results reflected the severe impact that the COVID-19 pandemic has had on the company's business—but also suggested brighter days are ahead, thanks to vaccine rollouts and increased bookings.

Systemwide comparable revenue per available room (RevPAR) decreased 38.4 percent year over year, and 53 percent compared to 2019. Rising COVID cases and tightening travel restrictions, particularly across Europe and Asia Pacific, weighed on demand through January and most of February, but March marked a turning point as the one-year anniversary of the lockdowns began. For the last month of the quarter, RevPAR turned positive, improving more than 23 percent year over year. Systemwide occupancy reached 55 percent driven by strong leisure demand. 

Shuttered hotels have also reopened since the nadir of 2020. Approximately 275 properties—primarily in the United States and Europe—suspended operations for some period of time during the quarter, compared to approximately 730 properties during the three months ended March 31, 2020. As of April 28, 97 percent of Hilton's hotels were open.

Recovery in group and corporate transients continue to lag—“as expected,” president and CEO Chris Nassetta said during an earnings call with investors. “But both segments showed sequential improvement versus the fourth quarter [of 2020].” Overall, he added, the positive momentum has continued into the second quarter of 2021. While recovery varies by region, vaccinations in the U.S. have driven a “significant lift” in both forward bookings and occupancy—“which is now around 60 percent”—as well as lengthening booking windows. 

Adjusted earnings before interest, taxes, depreciation and amortization was $198 million for the first quarter, while net loss was $109 million.

Development 

In the first quarter of 2021, Hilton opened 105 new hotels totaling 16,500 rooms and achieved net unit growth of 13,100 rooms. Since the beginning of the year, Hilton has opened its 100th Curio Collection by Hilton, the 1,500-room Virgin Hotels Las Vegas, and its 50th Tapestry Collection by Hilton, and executed a management agreement for the first Signia by Hilton, a 975-room new-construction project in Atlanta. Conversions accounted for approximately 24 percent of additions in the quarter.

Additionally, during the quarter, Hilton added more than 5,000 rooms to its development pipeline in connection with the exclusive management license agreement with Country Garden to introduce and develop Home2 Suites by Hilton branded properties in China

As of March 31, Hilton's development pipeline totaled more than 2,570 hotels consisting of nearly 399,000 rooms across 114 countries and territories, including 31 countries and territories where Hilton does not currently have any existing hotels. More than half of those rooms are already under construction. Additionally, of the rooms in the development pipeline, 241,000 rooms were located outside the U.S., and 204,000 rooms were under construction. 

Forecasts

Nassetta expects relaxed travel restrictions and increasing consumer confidence to drive further RevPAR improvements in the coming months and quarters. “In fact we are on pace to see record leisure demand in the U.S. over the summer months,” he said. April bookings for the summer are already exceeding 2019 peak levels by nearly 10 percent, and the company expects business travel to improve as offices reopen and travel restrictions are lifted. “In the first quarter, business transient revenue was roughly 75 percent of 2019 levels in states that were further along in the reopening process,” Nassetta said.

Near-term group bookings are still driven largely by social events and smaller group meetings, Nassetta said, but the company is seeing a slow shift back to a more normal mix of business. Corporate group leads are up more than 70 percent for future periods. Associations and trade shows are also setting up registration sites and booking blocks of rooms for events later this year. 

Nassetta also expects to see net unit growth in the mid-single-digit range for the next several years, and to expect growth in the 4.5 to 5 percent range in 2021.

This story originally appeared on www.hotelmanagement.net.

Related Stories

The Ray Hotel Delray Beach, Curio Collection Opening This Summer

Hilton Sandestin Beach Golf Resort & Spa Offering Onsite Testing