Hilton has maintained its 2017 guidance—1 percent to 3
percent growth in revenue per available room—though an uptick in corporate
transient business that began in the fourth quarter and carried into January has
made the company's outlook slightly more positive than it was a quarter ago.
"It would be hard to say that I don't feel a bit better
about our 1 to 3 than I did when we gave it to you last fall," CEO Christopher Nassetta
said during the company's earnings call. "The opportunity to be at the
midpoint [of Hilton's guidance] or above would be higher today than it was at
that time."
Even before Hilton and other hoteliers reported fourth-quarter
and full-year earnings, industry analysts broadly concluded that hotels performed
better than expected in the fourth quarter, fueled by a pickup in corporate
transient business. Hilton CFO Kevin Jacobs described it as a post-presidential
election bump.
The company has "some green shoots": A solid base
of group business is on the books, according to Nassetta, and corporate
transient business for 2017 looks good so far, as group average daily rate and
corporate negotiated rates are up 2 percent to 3 percent versus 2016. Still, Nassetta
said, there are "a lot of swirling winds out there" that could impact
the hotel business in 2017 and beyond.
"Some of the things that have created a positive
sentiment in the business community relate to the idea of tax reform,
regulatory reform, the possibility for infrastructure
spend," Nassetta said. "While I think there's decent momentum on a
number of those things, in the end, what will matter is what actually happens."
A key area of uncertainty follows President Donald Trump's
Jan. 27 executive order banning refugees from entering the U.S. for 120 days
and barring travel to the U.S. by citizens of seven Muslim-majority countries.
While the Ninth Circuit Court suspended that ban, the topic still came up
during Hilton's recent earnings call. Nassetta said international inbound
travel is a "relatively small component" of its U.S. hotel business
and that the segment has been affected more by the recent strengthening of the
U.S. dollar. "We have not seen any material impact as a consequence of
what’s happened in the past two to three weeks." Nassetta said.
Earnings by the
Numbers
Hilton's comparable systemwide occupancy increased 0.1
percentage points year over year during the fourth quarter to 71 percent. ADR
rose 0.7 percent to $140.62. For the full year, occupancy stayed flat at 75
percent, while ADR rose 1.9 percent to $143.63. Full-year group revenue per
available room grew by 2 percent to 3 percent, and corporate transient RevPAR grew
about 1 percent, according to Nassetta.
In the Americas, strong group performance drove RevPAR up 5
percent year over year in Canada during the fourth quarter, but Zika concerns
in the Caribbean and "economic contraction" in Brazil dragged down results,
according to Jacobs. Americas occupancy decreased 0.2 percentage points year
over year to 70.6 percent, and ADR increased 1.2 percent to $139.74.
In Europe, occupancy grew 1.3 percentage points year over
year to 75 percent and ADR rose 0.4 percent to $139.76. In the Middle East and
Africa, oversupply, decreased demand and political unrest caused occupancy to
fall 2.7 percentage points to 62.5 percent and ADR to drop 1.6 percent to
$158.17. Strong demand in China offset Japan's softer group performance in the
Asia/Pacific region, where occupancy increased 3.6 percentage points to 73.9
percent but ADR declined 3.4 percent to 146.61.
Costs of corporate restructuring prior to Hilton's
January spinoffs of Park Hotels & Resorts and Hilton Grand Vacations caused
the company's fourth-quarter net income to come in at a loss of $382 million. Total
revenue for the quarter increased 2.2 percent to $2.92 billion, and full-year
revenue grew 3.4 percent to $11.7 billion.