HLT
Earnings call · Mar 2025 (Q1 FY25)

Hilton Worldwide Holdings Q1 FY25 earnings call HLT

Apr 29, 2025 Source

Executive summary

Hilton Q1 FY25 — Resilient Performance Amidst Macro Uncertainty, Strong Development Pipeline

Hilton delivered resilient Q1 FY25 results, with adjusted EBITDA and EPS exceeding expectations despite system-wide RevPAR landing at the low end of guidance due to increasing macroeconomic uncertainty. The company demonstrated strong development momentum, expanding its pipeline and achieving robust net unit growth, while navigating a choppier demand environment. Management expressed confidence in its asset-light model and long-term value creation, anticipating a potential stabilization of macro conditions in the second half of the year.

Highlights

5

  • Adjusted EBITDA of $795 million and adjusted EPS of $1.72 both exceeded expectations.

  • Net unit growth reached 7.2% year-over-year in Q1 FY25, driven by 20% increase in rooms opened.

  • Development pipeline expanded to over 503,000 rooms, up 7% year-over-year, with 32,000 rooms approved in the quarter.

  • Group RevPAR increased more than 6% year-over-year, leading segment growth.

  • Non-RevPAR-driven fees outperformed expectations and are expected to remain above algorithm for the year.

Concerns

5

  • System-wide RevPAR growth of 2.5% was at the low end of guidance due to intensified macro uncertainty in March.

  • Leisure Transient RevPAR growth softened to 1% as the quarter progressed, mirroring broader macro uncertainty.

  • Q2 FY25 system-wide RevPAR is expected to be roughly flat year-over-year due to continued weaker trends and Easter holiday shift.

  • China RevPAR declined 3.1% in Q1 FY25 due to strong outbound travel during Chinese New Year and tough comparisons.

  • Inbound international travel from Canada and Mexico deteriorated to high single-digit declines in March/April.

Guidance & targets

CategoryTargetConfidence
System-wide RevPAR growth
roughly flat
high materiality
High
Adjusted EBITDA
$940 million and $960 million
high materiality
High
Diluted EPS adjusted for special items
$1.97 and $2.02
high materiality
High
System-wide RevPAR growth
0% to 2%
high materiality
High
Adjusted EBITDA
$3.65 billion and $3.71 billion
high materiality
High
Diluted EPS adjusted for special items
$7.76 and $7.94
high materiality
High
Net unit growth
6% to 7%
high materiality
High
U.S. RevPAR growth
around the midpoint of our revised system-wide RevPAR range
medium materiality
High
Americas outside the U.S. RevPAR growth
mid-single digits
medium materiality
High
Europe RevPAR growth
low single-digit
medium materiality
High
Middle East and Africa RevPAR growth
mid-single-digit range
medium materiality
High
Asia Pacific RevPAR growth
low single-digit range
medium materiality
High
Total shareholder returns
approximately $3.3 billion
high materiality
High

Segment performance

SegmentRevenueYoYQoQMargin
U.S.
Comparable RevPAR increased, driven by strong Group performance.
—2.1%——
Americas outside the U.S.
RevPAR increased, driven by key events in Mexico and Brazil, including Carnival.
—7.7%——
Europe
RevPAR grew with strong rate and occupancy growth in Continental Europe.
—2.6%——
Middle East and Africa
RevPAR increased, driven by strong performance in Saudi Arabia during Ramadan and key regional events.
—8.5%——
Asia Pacific
RevPAR was flat year-over-year.
—flat——
Asia Pacific ex China
RevPAR increased, led by strong performance in Japan, India and Korea.
—3.5%——
China
RevPAR declined, pressured by strong outbound travel during Chinese New Year and tough year-over-year comparisons.
—-3.1%——

Operational metrics

Adjusted EBITDA
$795 million up 6% year-over-year
Q1 FY25

Exceeded the high end of guidance, largely driven by better-than-expected growth in non-RevPAR-driven fees and timing items.

Diluted EPS adjusted for special items
$1.72
Q1 FY25

Exceeded expectations.

Hotels opened
186
Q1 FY25

Representing more than 20,000 rooms.

Rooms opened
20,000 20% year-over-year increase
Q1 FY25

Part of 186 hotels opened.

Conversions as % of openings
approximately 40%
Q1 FY25

Driven largely by DoubleTree and Spark.

Rooms approved
32,000 up 10% year-over-year
Q1 FY25

Contributed to pipeline growth.

Construction starts growth
13% year-over-year
Q1 FY25

Growth across all regions, particular strength in Asia Pacific.

Pipeline rooms under construction
nearly 0.25 million
Q1 FY25

More than any other hotel company.

Management and franchise fees growth
5% year-over-year
Q1 FY25

Contributed to adjusted EBITDA outperformance.

Cash dividend per share
$0.15
Q1 FY25

Total of $37 million in dividends for the year.

Cash dividend per share
$0.15
Q2 FY25

Authorized by the Board.

Inbound international travel
mid-single digits up on a revenue basis
Q1 FY25

Represents circa 4% of the business. Canada and Mexico deteriorated to high single-digit declines, offset by growth from Asian markets, U.K., and other parts of Europe.

EBITDA margin
over 1,000 bps higher vs. pre-COVID peaks
post-COVID

Result of efficiency gains and pivot during COVID.

IMF growth
mid-single digits
FY25

Expected to be positive even with 0-2% RevPAR growth, flowing through at about 1.5x.

Business Transient mix from small- and medium-sized businesses
roughly 85%
Q1 FY25

Resilient customer segment.

Industry KPIs

MetricValueDetails
Comparable sales comps2.5% %
Group booking pace booking windowmid-single digits %
Net unit growth development pipeline7.2% %

Product announcements

ProductTypeDetails
Hilton Garden Inn Greecelaunch
Hampton and Canopy Africalaunch
Spark Germany and Polandexpansion
Waldorf Astoria Osakalaunch
Waldorf Astoria Costa Ricalaunch
Signia Jaipur, India and Cairo, Egyptlaunch
Waldorf Astoria Texaslaunch
Waldorf Astoria Turks and Caicoslaunch
Tapestry and Curio Athens, Greecelaunch
Canopy Deer Valley, Utahlaunch
Tempo U.K.launch
Hilton Garden Inn Southeast Asiaexpansion

Deals & partnerships

NILE Hospitality Strategic licensing agreement to open 75 Hampton hotels in India.

This agreement, along with the Spark hotels agreement, expands Hilton's presence in India.

NILE Hospitality Agreement to open 150 Spark hotels in India.

This agreement, along with the Hampton hotels licensing agreement, expands Hilton's presence in India.

Risks & headwinds

Macroeconomic uncertainty and demand pressure Q1 FY25, Q2 FY25

System-wide RevPAR at low end of guidance (2.5% actual vs. expected); Leisure Transient RevPAR up 1% with softening demand; Q2 RevPAR expected roughly flat YoY.

Mitigation:Resilient asset-light business model, focus on development, strong balance sheet, and efficient operations. Expectation for uncertainty to wane in H2 FY25.

Tougher year-over-year comparisons Q2 FY25

Easter holiday shift impacting Q2 RevPAR.

Mitigation:Management has factored this into Q2 guidance.

China RevPAR decline Q1 FY25

-3.1% in Q1 FY25.

Mitigation:Attributed to strong outbound travel during Chinese New Year and tough comparisons; full-year FY25 guidance assumes flat RevPAR in China.

Deterioration in inbound international travel from Canada and Mexico March-April FY25

High single-digit declines for both countries in March/April.

Mitigation:Offset by growth from Asian markets, U.K., and other parts of Europe, resulting in neutral overall inbound international travel for March/April. Mexico and Canada represent only 1.5% of total revenue.

Uncertainty in the development landscape (tariffs, trade) Near-term

Developers are taking a 'wait-and-see' approach, though no real impact on signings/starts/deliveries yet.

Mitigation:Hilton's strong brand system attracts conversions in uncertain times, and the development community has a long-term view. Expectation for trade deals and legislative stability to reduce uncertainty.

Potential for construction cost increases Ongoing

Competitors' franchisees reporting 20-40% increases.

Mitigation:Hilton's view is that U.S. construction costs are trending mid-single digits, and the feared higher increases have not materialized. A 'wait-and-see' approach is being taken.

What to watch in Q2 FY25

System-wide RevPAR growth

next quarter
Current 2.5% (Q1 FY25)
Target roughly flat (Q2 FY25 guidance)

Why it matters

RevPAR performance is a key indicator of demand and directly impacts financial results, especially given the current macro uncertainty and Q2 guidance.

For the second quarter, we expect system-wide RevPAR growth to be roughly flat year-over-year.

Q&A highlights

What is management's perception of the current macroeconomic setup, particularly regarding recessionary fears, given their experience through past cycles?

Chris Nassetta believes the market is currently over-weighting downside risks due to significant uncertainty from ongoing legislative and trade changes. He anticipates that as these issues settle in the summer, the underlying strength of the economy will shine through, leading to a more balanced risk assessment. He noted that the current situation is not comparable to past major downturns like COVID or the Great Recession.

“I think at the moment, the risk in the marketplace is sort of weighted too heavily to the downside. If I look at what's going on in our business, certainly, we've seen a modest step back in demand patterns. But at the moment, those seem to be relatively stable.”

asked by Carlo Santarelli · answered by Christopher Nassetta

2 min read 6 chapters

Detailed narrative

Macroeconomic Outlook and Demand Trends

Management acknowledged a modest step back in demand patterns due to intensified macroeconomic uncertainty, particularly impacting Leisure Transient RevPAR in March. Despite this, underlying economic indicators like employment, wage growth, and corporate balance sheets remain strong. The company believes the market is currently over-weighting downside risks, anticipating a potential stabilization or improvement in conditions by the second half of the year as legislative processes and trade deals progress. Short-term bookings are roughly flat year-over-year, indicating a 'wait-and-see' approach from travelers.

Development Momentum and Pipeline Strength

Hilton reported a strong start to 2025 in development, opening 186 hotels (over 20,000 rooms) and achieving 7.2% net unit growth. The development pipeline grew 7% year-over-year to over 503,000 rooms, with nearly half under construction. Conversions accounted for approximately 40% of openings, driven by DoubleTree and Spark, and are expected to increase in softer environments. Construction starts were up 13% year-over-year, excluding partnerships, with particular strength in Asia Pacific.

Regional Performance Overview

U.S. comparable RevPAR increased 2.1%, led by Group performance. Americas outside the U.S. saw 7.7% RevPAR growth, boosted by events in Mexico and Brazil. Europe RevPAR grew 2.6% due to strong rate and occupancy in Continental Europe. Middle East and Africa led with 8.5% RevPAR growth, driven by Saudi Arabia and regional events. Asia Pacific RevPAR was flat, with APAC ex China up 3.5% but China down 3.1% due to outbound travel and tough comparisons.

Strategic Brand Expansion and New Market Entries

The company continued its global expansion, with international markets representing half of new additions. Notable debuts included Hilton Garden Inn in Greece, Hampton and Canopy in Africa, and Spark in Germany and Poland. Luxury and Lifestyle categories accounted for 30% of openings, approaching 1,000 hotels globally. Strategic signings included Waldorf Astoria properties in Osaka, Costa Rica, Texas, and Turks and Caicos, and new Signia hotels in India and Egypt, marking brand debuts in Asia Pacific and Africa.

Business Model Resilience and Capital Allocation

Hilton emphasized the resilience of its asset-light, fee-based business model, which boasts high EBITDA margins (over 70%). The company maintains low leverage, significant liquidity, and hyper-efficient G&A. Management highlighted its ability to outperform competitors during disrupted environments, citing margin improvements post-COVID. For FY25, Hilton expects to return approximately $3.3 billion to shareholders through buybacks and dividends, demonstrating confidence in its cash generation.

Organic Growth and Brand Strategy

Hilton remains focused on organic growth, with 24 brands providing ample opportunities across markets. The company is exploring new organic brand developments, including a Lifestyle collection under Tapestry, a hard brand between Motto and Canopy, and expansion into furnished apartment space. This strategy aims to fill market niches, meet owner demand, and continue building on its industry-leading brand portfolio without relying on large-scale M&A.

AI-generated summary of the company's earnings call. Not investment advice.