Hilton Worldwide's first-quarter systemwide business transient revenue per available room increased 2 percent year over year, executives said Tuesday, driven by steady demand from small and midsized enterprises. Larger companies may be more cautious considering economic uncertainty, Hilton president and CEO Christopher Nassetta said during the company's quarterly earnings call.
The growth in business transient RevPAR could have received a boost from the year-over-year shift in the Easter holiday, around which business travel typically slows, and which was March 31 last year and April 20 this year. Still, demand from SMEs, which Nassetta said make up 85 percent of Hilton's business transient volume, held firm in the first quarter.
"We've seen … very little impact on the SMB business because these folks got to get out and run their business, and they're not going to be as quick to make decisions, and a little bit more on the big corporates," Nassetta said. He called the banking and finance sectors "a bright spot … where we've seen a pretty nice uptick," but on the whole called larger corporate clients "a little bit more cautious. They're going to be a little bit more waiting to see where all this goes."
Nassetta in February was bullish about the prospect of economic growth and subsequent increased hotel demand due to the return of Donald Trump to the U.S. presidency, and while on Tuesday he acknowledged "there's just a fair amount of uncertainty," he also suggested markets were too pessimistic about Trump's actions.
Nassetta said he believed summertime legislation on many of Trump's priorities—regulatory reform, tax cuts, energy policy—along with bilateral trade deals could help to spur the economy later in 2025. "I think it's not crazy to think that all that starts to come together this summer. And as a result, when you get to the second half of the year, you could be in a very different place," he said. "The underlying economy is still really strong."
He also called the market volatility to Trump's policies "an overreaction."
"Anytime you have like seismic change … there's a reaction," Nassetta said. "My own experience says there's an overreaction. Right now, there's a lot of uncertainty. I think there's a bit of an overreaction to it."
Hilton's systemwide first-quarter RevPAR increased 2.5 percent year over year, at the low end of its projection one quarter before, to which executives attributed to softer demand amid broader economic uncertainty, particularly in leisure stays, particularly in March. That softness has extended into the second quarter, Nassetta said.
First-quarter revenue from inbound international U.S. travel increased "mid-single digits" year over year, Nassetta said, though that market represents only about 4 percent of the hotel company's revenue. Inbound booking revenue from Canada and Mexico, however, each is down "high single digits," he said.
Hilton Q1 Metrics
Hilton's systemwide first-quarter RevPAR increased 2.5 percent year over year to $103.59, while average daily rate increased 1.8 percent to $155.07 and occupancy increased 0.4 percentage points to 66.7 percent.
In the United States, first-quarter RevPAR increased 2.1 percent yar over year to $111.39, while ADR increased 1.7 percent to $164.58 and occupancy rose 0.2 percentage points to 67.7 percent.
Hilton projected second-quarter RevPAR to be "roughly flat" year over year, with full-year RevPAR projected to be in a range from flat to up 2 percent. The company last quarter projected full-year RevPAR gains of 2 percent to 3 percent.
First-quarter revenue increased nearly 5 percent year over year to about $2.7 billion.
Hilton's development pipeline at the end of the first quarter totaled 503,400 rooms, up 7 percent from the year prior.
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