By Doyinsola Oladipo and Priyamvada C
(Reuters) – Hilton Worldwide Holdings beat Wall Street estimates for second-quarter revenue on Wednesday and lifted its annual outlook again, as record lodging prices and rebounding group, corporate and summer travel demand boosted results.
Hotel operators like Hilton are beginning to see strong performance from a rebound in international travel post pandemic, even as demand plateaus in the U.S. after benefiting in recent quarters from a rise in domestic bookings. Consumers are taking advantage of a stronger dollar and vacationing in Europe this summer while demand rebound in Asia.
Shares of the company were flat in early trading. The stock has gained 19.6% so far this year.
The company’s revenue per available room, or RevPAR, an important metric in the hospitality industry, rose about 12% in the quarter from a year earlier.
“Growth was driven by strong demand growth in Asia-Pacific as well as continued strength in leisure and steady recovery in business transient and group travel,” CFO Kevin Jacobs told investors on a call.
Second-quarter revenue rose about 19% to $2.66 billion, exceeding the average Wall Street estimate of $2.58 billion, according to Refinitiv.
The hotel operator said it now expects full-year adjusted profit to come in between $5.93 and $6.06 per share, compared with its prior forecast of $5.68 to $5.88 per share.
“There’s still huge amounts of pent-up demand that haven’t been released,” CEO Christopher Nassetta said on an investors call.
U.S. hotel demand has been below pre-pandemic levels for four consecutive months, falling 2% in June year-over-year. About 69% of Hilton’s rooms are in the U.S. and North America, according to Kate Xiao, Bernstein research associate.
“Leisure demand in the U.S. remained strong but grew more modestly year-over-year due to tougher comparisons,” said Jacobs, adding that performance benefited from “recovery in international inbound travel, particularly from the U.S.”
Hilton’s net unit growth (NUG) – which reflects room additions – rose 4.2% year-over-year in the second quarter compared to a 4.7% increase in the first quarter, Truist Securities analyst Patrick Scholes said in a note.
However, the hotel operator downgraded guidance from 5-5.5% to approximately 5% for the full year. It posted record adjusted EBITDA of $811 million, exceeding the average Wall Street estimate of $782 million by 3%, according to Refinitiv.
A 3% beat for EBITDA “is below the norm for Hilton to be honest, and (the) NUG downgrade plays into fears of a slowing development environment,” said Richard Clarke, Bernstein hotel and online travel agency equity analyst.
Higher interest rates and an uncertain demand outlook have slowed construction for larger hotel companies, despite their higher hotel-level margins, easier access to financing and work with longer-term owners, Clarke said in a research note in July.
(Reporting by Priyamvada C in Bengaluru and Doyinsola Oladipo in New York; Editing by Krishna Chandra Eluri and Jan Harvey)
