Hilton CEO promises two new brands in near future
Hilton CEO promises two new brands in near future
24 JULY 2019 3:27 PM

On Hilton’s latest earnings call with analysts, President and CEO Chris Nassetta announced the company is expecting to launch two lifestyle brands in the next couple of years, the first being within the next six months.

MCLEAN, Virginia—Over roughly the past year, Hilton has launched three brands—Motto by HiltonLXR and Signia Hilton—and the company is looking to add two more in the near future, President and CEO Chris Nassetta announced on the company’s second-quarter earnings call with analysts Wednesday.

Nassetta did not go into detail on brand names or specific launch dates, but he told analysts there are a couple brands that Hilton is working on, and both are in the lifestyle space.

“One … is a very large-scale opportunity on a global basis, which I would say is sort of upscale lifestyle. I would describe it as sort of a click above Hilton Garden Inn. … I do think that (new) brand has a huge amount of potential in terms of hundreds and hundreds and hundreds of hotels around the world,” he said. “We have already soft launched it with our development community. The reception has been spectacular.”

He said Hilton will likely time a brand launch “sometime in the next six months as we refine the product, service delivery and bring a number of development deals to the table.”

The other brand, which is less imminent, is more in the luxury lifestyle space, he said. It has been on Hilton’s mind for about a decade, but the company has focused on other opportunities, he noted.

“We are not going to be launching three brands every year, to be clear. I think in the next year we’ll probably do one … (and) luxury lifestyle in the next couple of years,” he said.

The addition of these future brands will bring Hilton’s brand portfolio to 19. Nassetta said that is plenty of “brand bandwidth for us to keep growing indefinitely, particularly given that we are just getting started with some of these brands.”

As for the company’s existing brands, Hilton touted that Tru, its 13th brand that launched in 2016, will open its 100th property this year. Also in 2019, Hilton expects to celebrate the opening of the 500th Homewood Suites, 850th Hilton Garden Inn and 2,500th Hampton, “demonstrating continued strength across the new and legacy brands,” Nassetta said.

He added that Hilton Garden Inn’s new prototype is aimed to better serve the needs of Chinese guests and owners, and it’s gaining great momentum.

Other areas of momentum for Hilton include the luxury segment.

With Hilton forecast to grow its luxury segment by more than 15% this year, “we’re on track to deliver more luxury properties in 2019 than any previous year in our 100-year history,” Nassetta said. This year, Hilton opened four luxury properties, including the Waldorf Astoria Maldives Ithaafushi in early July.

In the second quarter, the company approved 28,100 new rooms for development, bringing the total development pipeline to about 373,000 rooms as of 30 June, according to a company news release.

A total of 17,100 rooms were opened in the quarter, and Hilton remains on track to deliver approximately 6.5% net unit growth for full-year 2019. Rooms under construction account for more than half of the company’s pipeline, Nassetta said.

“We’re happy to report another quarter of great results … that further demonstrates the strength of our business model and the power of our network effect,” he said. “Net unit growth continues to drive strong bottom-line performance.”

For the full year, he said the company remains on track for record signings, construction starts and openings. It has forecasted signings of more than 110,000 in 2019, which would mark a ninth consecutive year of record signings.

“This supports continued growth in our development pipeline, which we expect to increase in the low- to mid-single digits for the full year,” he said.

He said Hilton sees the greatest development opportunity in the midmarket, driven by the emerging middle class. The company is well-positioned to continue to deliver growth in the focused-service segment, he added.

“The breadth of our development strategy spanning all regions and brand segments should position us to drive net unit growth for many years to come,” he said.

As of 30 June, Hilton had a portfolio of 5,872 properties comprising 939,297 rooms, according to the release.

Regional performance, outlook
In the U.S., comparable revenue per available room grew 1%, driven by increasing market share and solid leisure transient growth, while the Easter shift softened group business, EVP and CFO Kevin Jacobs said on the call.

For full-year 2019, Hilton forecasts RevPAR growth of between 1% and 2%, based on “positive but modestly decelerating macro growth,” he said.

In the Americas outside of the U.S. region, RevPAR grew 3.3% compared to the period in 2018, led in part by performance in Brazil, where transient demand was robust despite challenging market conditions.

RevPAR at Hilton’s hotels in Europe grew 5%, largely due to increased leisure demand in London during the Cricket Council World Cup as well as favorable exchange rates.

In the Middle East/Africa region, RevPAR was slightly positive during the quarter, boosted by strong group performance during Ramadan. Supply challenges, however, continue to weigh on leisure transient gains in Egypt, which Jacobs expects to continue in the back half of the year. RevPAR is expected to be down for full-year 2019 in the low single digits, he added.

For the company’s hotels in the Asia/Pacific region, RevPAR increased 2% in the quarter, despite a slight RevPAR decline in China due to the softening Chinese leisure travel demand and political uncertainty. For the full year, RevPAR is expected to remain flat in the region.

As of press time, Hilton stock was trading at $95.31 a share, up 34.3% year to date. The Baird/STR Hotel Stock Index is up 17% for the same period.

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