Hilton Worldwide's third-quarter business travel demand continued to recover, with business transient revenue per available room up about 5 percent year over year, Hilton president and CEO Christopher Nassetta said Wednesday during an earnings call.
Meanwhile, Nassetta suggested that the average percentage index in 2024 corporate rates, currently in negotiations by some corporate clients, likely would be in the "upper single digits." He noted that contracted corporate business comprised about "6 percent of our business," compared with small and midsize businesses, which he said comprise "85 percent of the business." Most 2024 contracted corporate pricing would include dynamic rates, he said.
The standout in Q3 for Hilton, Nassetta said, was group demand, which he said was "off the hook."
Group RevPAR in Q3 grew 8 percent year over year and outperformed both leisure and business transient RevPAR growth, which each increased 5 percent year over year, Nassetta said. In Q3, group RevPAR exceeded 2019 peak levels for the first full quarter since the pandemic.
The company continues to see positive group booking trends for "all future periods," Nassetta said on the call, noting that on-the-books group business for next year is up 18 percent year over year. Small- and medium-sized groups make up 85 percent of Hilton's group business, he said.
"[Group] has always been dominated by small and medium groups," Nassetta said, adding that the company expects to see the return in 2024 of "the mega groups" and large corporate groups, which "have a huge amount of pent-up demand that needs to be satiated."
Despite discussion around economic impact on business, Nassetta said the company "has not seen any real impact in terms of group demand."
Q3 Metrics
Overall, Hilton reported growth across all RevPAR sectors, both year over year and against 2019 levels. Compared to 2019 in Q3 with "all segments accelerating sequentially against the second quarter," Nassetta said. This performance was driven by occupancy and rate, he added.
Hilton's third-quarter systemwide RevPAR was $121.37, up 6.8 percent year over year, and 11.4 percent higher than 2019 levels.
Average daily rate in the quarter was $161.20, up 3,6 percent year over year.
Demand also increased across all segments and regions. Systemwide occupancy was 75.3 percent in Q3, up 2.2 percentage points year over year and the company's highest level post-pandemic, Nassetta said. In September, occupancy was just one point shy of 2019 levels, he added.
Nassetta called strong group demand the "last leg of the stool" that would allow Hilton to "get back to occupancy levels comparable to 2019," and predicted the company in 2024 would reach 2019 occupancy levels, driven mostly by SMEs.
In the third quarter, Hilton reported $2.67 billion in revenue, up 12.7 percent year over year. The hotel company's net income in the quarter was $379 million, up from $346 million in the same period in 2022.
Regional and Pipeline Growth
International growth was most notable in the Asia-Pacific region, which recorded 39 percent year-over-year Q3 RevPAR growth. This was bolstered by continued demand in China, ," Hilton CFO and president of global development Kevin Jacobs said, where third-quarter RevPAR was up 38 percent year over year 12 percent over 2019 levels.
Domestically, third-quarter U.S. RevPAR grew 3 percent year over year, driven by group and business transient demand.
Hilton's pipeline is also on the rise. In Q3, Hilton's pipeline grew 10 percent year over year and 4 percent over Q2.
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