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Hilton reported stronger hotel demand and higher room rates Tuesday, lifting third-quarter profit to $536 million from $421 million a year earlier as travelers continued spending on overnight stays.
The hotel company said comparable revenue per available room rose 5.8% from a year earlier, excluding currency movements. Both occupancy and average daily room rates increased. That combination matters to travelers: the gain was not simply a 5.8% increase in the price of a room, but reflected more rooms being filled as well as higher prices for occupied rooms.
Hilton’s results offer a fresh reading on travel spending, though the company cautioned that the quarter benefited from the World Cup and favorable calendar and holiday shifts. Those boosts make it harder to treat the quarter’s pace as a straight-line forecast for the rest of the year.
Growth continues, but at a slower pace
Hilton forecast comparable room-revenue growth of 3% to 3.5% in the fourth quarter and 4% to 4.5% for the full year, both on a currency-neutral basis. The company said the fourth quarter would be affected by the U.S. midterm elections and an increased impact from the Middle East.
Its full-year forecast calls for net income of $1.909 billion to $1.923 billion and adjusted earnings of $9.07 to $9.13 a share. Hilton said its projected adjusted EBITDA of $4.06 billion to $4.08 billion incorporates lower expectations for the Middle East and timeshare license fees than in its previous guidance.
For people budgeting a vacation or business trip, the results show why hotel bills depend on both destination and timing. Hilton’s global average describes the performance of its comparable hotel system, not the price a specific traveler will pay in a particular city. The company did not provide a single forecast for the rate charged to every guest.
More hotels, more rooms
Hilton opened 182 hotels with 27,000 rooms in the quarter. After rooms that left the system were taken into account, it added 23,000 rooms on a net basis. Its total room count grew 6% from a year earlier.
The development pipeline reached 543,100 rooms across 3,869 hotels in 135 countries and territories. Nearly half of those rooms were under construction, and more than half were outside the United States. A development pipeline is planned supply, not rooms that travelers can book today.
New openings included the first Spark by Hilton in Italy and brand debuts in Singapore and Thailand. Hilton said it expects full-year net unit growth of 6% to 7%, around the midpoint of that range.
Fees and profit rise
Management and franchise fee revenue increased 9.5% in the quarter, Hilton said. Diluted earnings rose to $2.37 a share from $1.78, while adjusted earnings increased to $2.45 from $2.11. Adjusted EBITDA, a profit measure that excludes interest, taxes, depreciation, amortization and other items, rose to $1.058 billion from $976 million.
Hilton returned $879 million to shareholders through buybacks and dividends during the quarter and projects about $3.5 billion in capital returns for the year. At September 30, it had $13.5 billion in debt outstanding and $830 million in cash and cash equivalents, including restricted cash.
The company also confirmed a quarterly dividend of 15 cents a share, payable December 29 to shareholders of record on December 1. Its stock is scheduled to move from the New York Stock Exchange to Nasdaq on November 5 under the same HLT ticker, a previously announced change that Hilton said requires no shareholder action.
JBizNews Desk | McLean, Virginia
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