Hilton Worldwide improved its second-quarter year over year
results in occupancy and average daily rate growth.
Systemwide occupancy rose 1.3 percentage points to 79.2
percent, while ADR increased 3.4 percent to $142.48.
Softer than expected performance in transient business
during May, particularly in oil and gas markets and flood-prone regions, slowed
revenue per available room growth, CEO Christopher Nassetta told investors
during Wednesday’s earnings call.
Revenue from group bookings grew by mid-single digits, and
Hilton expects growth to remain at that level into 2016, with fourth-quarter 2015
group results outpacing third-quarter results.
Nassetta said Hilton intends to launch a midscale brand during
the first quarter of 2016. The price point will sit below Hilton’s Hampton Inn,
and the brand will be mostly new-build properties.
“The target market is about 40 percent of U.S. room night
demand, demand that our current system largely does not serve,” Nassetta said. “We
have already received tremendous interest from our owners on this brand, and
our goal is to have a system size larger than Hampton over time.”
Major hotel companies in recent years, Hilton included, have
focused on brand launches in the upscale and luxury segments. One analyst
questioned Hilton’s entrance into a segment in which U.S. supply has decreased
as owners look to develop, instead, in higher tiers.
“There is no good midscale product. That's why we are doing
it,” Nassetta said. “The demand is there. The reason nobody is building there is
because there's no product that resonates with the customer, and these types of
products aren't delivering returns to owners.”
Nassetta echoed his June comments
on corporate negotiated rates. “If we were in the low to mid-single digits
[last year], this year I would expect we'd be in the mid- to higher single
digits, just because we do have incrementally more pricing power.”
Hilton also provided some information about its Digital Key program,
which would allow guests to unlock their rooms via the HHonors app on their
mobile devices. The technology is in pilot at select hotels near Hilton's
Virginia headquarters, and the pilot program will grow to 30 U.S. hotels in the
coming months. Nassetta expects Digital Key to go live at hundreds of hotels by
year’s end.