Hilton Worldwide has seen a pick-up in business travel in
the third quarter, as well as some group business bookings "in the year,
for the year, and not in insignificant amounts," said the company's
president and CEO Christopher Nassetta on a Wednesday morning earnings call.
Hilton saw steady increases in demand over the summer, led
by leisure. Those trends slowed after Labor Day; however, that was "offset
by the slight uptick of corporate transient," Nassetta said. "It's
not the traditional [transient] customers … it's smaller business, sales
forces, frontline folks responding to the crisis."
He added that the group bookings also were not what the
company typically sees for that segment. "It's smaller corporate meetings
in lieu of being in the office, it's sports groups, and it's groups related to
the recovery and crisis efforts," he said.
The more traditional groups are booking and rebooking very
little in the first quarter of 2021 and "some" in the second quarter,
with "the bulk picking up good velocity in the second half of next year
and beyond," Nassetta noted.
Overall, he said the company saw improvement during the
third quarter over the second quarter, and that 97 percent of the systemwide
properties were now open, with a "vast majority" operating at
breakeven occupancy levels or better.
"We're encouraged by the progress made over the last
several months," Nassetta said. "Travel demand is gradually picking
up around the world, and we've welcomed back most of our corporate team members
last month." He added that Hilton is in the first phase of reopening its
corporate offices, development deals have picked up, and travelers are feeling
more comfortable.
Still, while there was the loosening of some travel restrictions
during the summer, Covid-19 cases have picked up around the world, adding uncertainty
to the fourth quarter. "There is a risk with the virus, it could go
backwards," Nassetta said. "Our best sense at the moment is people
figuring out how to manage their own risk profile. We have a lot of data and
information, and so long as countries aren't locking them down, there's some
level of mobility that will likely allow us to maintain this level of
operations we've been seeing."
Q3 Metrics
Not unlike other companies that have released third-quarter
earnings, all three key performance metrics were down from one year ago, but
had shown improvement over the second quarter. Third-quarter systemwide revenue
per available room declined 59.9 percent year over year on a comparable
currency neutral basis, compared to an 81 percent drop at the end of June. Year
to date it's down 55.9 percent. U.S. RevPAR fell 58.6 percent year over year
and has declined 54.6 percent year to date.
Occupancy levels also have begun to recover. The systemwide
occupancy level as of Sept. 30 was 42.5 percent, down 36 percentage points from
the year prior. This level compares to 22.3 percent occupancy for the second quarter. In the U.S., occupancy
for the third quarter was 44.3 percent, down 34.8 percentage points from 2019.
The average daily rate was down 26 percent year over year
for both the global portfolio as well as for the United States. The Middle East
and Africa has been better at retaining ADR than other regions, with it down
12.5 percent and 9.5 percent for the quarter and year to date respectively,
compared with quarter declines in the mid-20 percent and year-to-date declines
in the mid-to-high teens for other geographies.
Unit Growth and Pipeline
Hilton opened 17,100 rooms in the third quarter, with a net
addition of about 14,800 rooms for 4.7 percent growth year over year. The
company increased its full-year expectation for net room growth from a range of
3.5 percent to 4 percent, to a range of 4.5 percent to 5 percent, with positive
momentum in conversions.
Further, Hilton approved 17,400 new rooms for development
during the quarter, bringing its development pipeline to 408,000 as of Sept.
30, an 8 percent increase from Sept. 30, 2019. Conversions were up 50 percent
year over year for the quarter, and they accounted for 20 percent of the new
signings.
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