In line with preliminary first-quarter results it released in April, Hilton Worldwide's first-quarter revenue per available room declined 22.6 percent year over year on a currency-neutral basis, primarily as a result of occupancy and fee decreases due to the coronavirus pandemic. The steepest decline was in Asia/Pacific at 44.1 percent. U.S. RevPAR declined 21.2 percent.
March global RevPAR declined 57 percent year over year, not far off from the 56 percent previously anticipated, but the company expects April's decline to be as high as 90 percent, Hilton president and CEO Christopher Nassetta said in a Thursday earnings call.
Systemwide occupancy declined 14.3 percentage points year over year to 56 percent. Average daily rate dropped 3 percent. Net income for the quarter was $18 million, an 89 percent decline compared to a year ago.
"With the exception of the Asia/Pacific region, Hilton's first-quarter results were not significantly impacted by the Covid-19 pandemic until March 2020, with occupancy roughly flat through February in the Americas and Europe, Middle East and Africa regions," Nassetta said. "As such, results for the three months ended March 31, 2020, are not indicative of future results and the material negative impact that the Covid-19 pandemic is expected to have on Hilton's business for an indeterminate length of time."
The company has begun to see a recovery in its Asia/Pacific region. In China, occupancy as of May 4 was approximately 40 percent, up from about 9 percent in early February, and nearly all of the approximately 150 hotels that had suspended operations have reopened. As of early May, with travel demand at record lows, Hilton had suspended operations at about 950 hotels, representing 16 percent of its global footprint.
Hilton opened 8,800 rooms during the quarter, for a net addition of 6,100 rooms. As of March 31, it has 977,939 rooms in its portfolio. It also approved 29,500 new rooms for development, growing its pipeline to 405,000, a 9 percent increase compared with March 31, 2019. Of those in the pipeline, 213,000 rooms were under construction. The company also signed the largest multi-brand deal in Hilton's history with Resorts World Las Vegas for a 3,500-room resort uniting Hilton Hotels & Resorts, LXR Hotels and Resorts and Conrad Hotels and Resorts.
To conserve cash, the company reduced executive salaries, furloughed two-thirds of its corporate workforce, eliminated other nonessential expenses and suspended share buybacks and dividends. It also drew down on the remaining amount under its credit facility and executed a bond offering, Nassetta said. Further, in April, the company pre-sold Hilton Honors points to American Express for $1 billion in cash. These measures resulted in a cash position of $3.8 billion as of March 31, "which is more than adequate liquidity to get us through the crisis."
When asked about group business, Nassetta responded that he thinks transient leisure travel will return first, then business travel, followed by group. "It's always the last to recover, for no other reason than it's a longer lead business," he said. "The economic impact will be greater than what we've seen, and people have to get comfortable congregating again. I think it will happen, when you get two to three years out, it will look more like it did 90 days ago than it does now."
Still, Nassetta also noted that it could take "several years" to return to the demand levels experienced in 2019. "Quarter two will not be pretty, but hopefully quarter three and quarter four we'll be on the road to recovery," he said.
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