Hilton Worldwide executives on Friday reported that growing corporate transient and group demand contributed to a strong first quarter, and that they are readying two new brands to be launched later this year.
During the first quarter, Hilton's group revenue growth increased 7.4 percent year over year, and transient revenue increased 6 percent, president and CEO Christopher Nassetta said in the company's earnings call. It marked the first time "in many quarters" that group growth outpaced transient growth, he added.
Revenues from U.S. corporate transient business increased 6.2 percent year over year in the first quarter and were up 12 percent in March, CFO Kevin Jacobs said. Revenues from corporate meetings at Hilton's owned and managed hotels in the United States were up 12 percent in the quarter.
The average daily rate across Hilton Worldwide's portfolio increased 3.6 percent year over year to $139.13 during the first quarter. ADR increased between 2 percent and 4 percent at most of Hilton's brands and by a bigger rate at three brands: Embassy Suites (up 5.3 percent to $146.50), Waldorf Astoria Hotels & Resorts (up 6.5 percent to $332.21) and Conrad Hotels & Resorts (up 7 percent to $271.44).
ADR at U.S. hotels increased 3.5 percent to $134.34, and ADR at non-U.S. hotels was up 3.7 percent to $159.27 during the quarter.
Systemwide occupancy during the quarter increased 1.9 percentage points year over year to 69.8 percent. Occupancy was up across all brands except Waldorf Astoria, at which there was a slight decline of 0.3 percentage points to 74.9 percent.
During the call, Nassetta also said Hilton already has a "meaningful number of deals to develop" the two new brands.
The first, to be launched this summer, would "aggregate four-plus-star urban hotels and iconic resort hotels that don't fit in the box of specified standards of our other brands," Nassetta said. The model sounds similar to such "soft brands" as Marriott International's Autograph Collection.
Nassetta described the second, slated for a fall debut, as a "lifestyle brand," though he added that Hilton intends to put it at a slightly lower price point than some of its competitive set.
"Most [of our competitors] have accessed lifestyle at a luxury price point, and we believe there's demand at the upper upscale level," Nassetta said. "We'll be able to build a brand that is much bigger than what we have seen others be able to do."
Hilton’s entry into the lifestyle hotel space has been in the works for years. Hilton in 2009 attempted to launch a lifestyle brand, Denizen, but was thwarted by a lawsuit from Starwood Hotels & Resorts alleging corporate espionage by two former Starwood executives hired by Hilton to develop the brand. As part of the settlement of that suit, Hilton agreed not to develop a lifestyle brand competitive to Starwood’s W brand for a period that ended in January 2013.
Both of Hilton’s new brands would include a mixture of new builds and conversions, and deals currently under discussion include a "significant number of conversions," Nassetta said.
Hilton's net income for the quarter was $124 million, compared with $38 million in the first quarter of 2013.