Hilton president and CEO Christopher Nassetta pegged 2019 corporate rate increases in the 2 percent to 3 percent range during the company's third-quarter earnings call. Last year, Hilton projected rates to end the year between 1 percent and 3 percent higher than in 2016, and the actual increase landed on the modest end of that range, close to 1 percent. However, the outlook is improving and business travel is looking strong for next year, based on "the latest and greatest update" Nassetta received from Hilton's corporate sales team this week.
Negotiated corporate business makes up only 10 percent of Hilton's overall business, but Nassetta said the segment serves as a positive macro-indicator for 2019. "Not everybody is created equal, but broadly, [corporates] say they're going to travel more for business and for meetings and they know they're going to pay more and they're willing to pay more," Nassetta said.
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Other indicators Hilton is looking to for 2019 include the forecasted strength of demand growth, at 2.1 percent, over supply growth, at 1.9 percent, as well as projected strength in international markets based on regional GDP growth forecasts. Growth in group rates are in the "mid- to high-single digits" for 2019 with 70 percent of group business on the books. Hilton projects 2019 revenue per available room growth to land in the range of 2 percent to 4 percent.
Q3 Results
Third-quarter systemwide RevPAR rose 2 percent year over year, driven entirely by average daily rate growth, which increased 2.1 percent to $147.29. Corporate transient RevPAR grew 3 percent, and group business remains strong, according to Nassetta. Third-quarter net income rose 2.4 percent to $164 million.
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The company added 3.7 million new members to its Hilton Honors program, a year-over-year increase of more than 16 percent. Nassetta said Hilton's approximately 82 million members now account for almost 60 percent of Hilton's systemwide occupancy. The company is growing its direct channel business through loyalty member bookings, while bookings through online travel agencies are flat as of the third quarter. "The trends are what we want to see, which again is not that we're not going to or don't want to work with the OTAs," Nassetta said. "We do. We just want to work with them in the right times, in the right ways at the right price."
Hilton opened 16,100 rooms during the third quarter, increasing its net unit growth by 24 percent to 14,800 rooms year over year. As of Sept. 30, Hilton's pipeline stood at 371,000 rooms, an 11-percent year-over-year gain.
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