Hilton
Worldwide is "tempering expectations" for revenue growth for the
remainder of the year after weak corporate transient business hindered results
in the second quarter.
During
the company's quarterly earnings call this week, CEO Christopher Nassetta said
Hilton now expects systemwide full-year growth in revenue per available room in
the 2 percent to 4 percent range, down from the 3 percent to 5 percent RevPAR range
provided during the company's first-quarter earnings report.
Nassetta
said in spite of the forecasted pickup in corporate transient following the
first quarter, world events, such as the United Kingdom's referendum to leave
the European Union, have contributed to increased uncertainty around the globe.
Heading into corporate request for proposals season, Nassetta said Hilton is in
a less favorable position than last year, but the company still anticipates
rate growth.
"[Corporates
with negotiated rates] are maybe 20 percent of the corporate business, 10 percent
of the overall business," Nassetta said. "I do think in a weaker
environment it's going to be tougher to push rates and I think that last year
we were all sort of in the mid-single digits and…our objectives were mid to
high-single digits. I think this year we're not there, but likely it's going to
be in mid-single digits."
Second
quarter occupancy inched up 0.1 percentage point year over year to 78.9
percent, while average daily rate rose 2.7 percent year over year to $146.52.
Systemwide revenue grew to $3.1 billion, up from $2.9 billion last year.
Hilton cleared 24,000
new rooms for development during the quarter. Its pipeline stands at 1,822
properties comprising 288,000 rooms. The company's newest brand, Tru by Hilton,
has a pipeline of 120
hotels comprising 11,000 rooms. The first is expected to open early next year.
Regional Performance
In
the United States, the west coast served as a bright spot for Hilton, with
RevPAR in Los Angeles increasing 16 percent year over year, but Chicago,
Houston and New Orleans all saw weaker results during the quarter. Growth in
inbound travel from China, the United Kingdom and Japan offset a decline in
inbound travel from Canada and Brazil.
In
the Americas outside the United States, political and economic instability, as
well as fears from the Zika virus, impacted regional demand. Brazil should get
a bump in occupancy and rate growth in the third quarter as a result of the
Olympics.
In
Europe, occupancy decreased 2 percentage points year over year to 76.1 percent,
but ADR increased 2.3 percent to $145.02. Geopolitical worries and terrorist
attacks decreased travel demand into Turkey and Belgium. Weaker corporate
transient demand impacted hotels in London. Germany and the Netherlands
outperformed the rest of the region thanks to strong group business and
increases in ADR. "Going forward, we expect Brexit and other recent events
in Europe to increase uncertainty and potentially hurt demand across the
broader region," said Hilton CFO Kevin Jacobs.
In
the Asia Pacific region, the recent earthquakes and soft transient business dragged
on performance in Japan. Conversely, China is seeing positive results from new
hotel openings. The region overall saw ADR dip 1.9 percent to $142.33 and
occupancy increase 3.7 percentage points to 69 percent.
The shifting of Ramadan provided a 21.1 percent year
over year bump in ADR to $172.36 for hotels in the Middle East and Africa. The region
still saw a 7.2 percentage point dive in occupancy to 60.4 percent, and is
forecast to see a decline in ADR and occupancy in the remainder of the year.