Hilton Hotels Sees No Slowdown in Travel Surge

25.08.2023 - 13:10 / skift.com / Christopher Nassetta / Sean Oneill / Hilton Hotels

Hilton’s earnings report on Wednesday was the first one from a major hotel group for the second quarter. All eyes were on whether the company saw any cracks in demand. In short: No.

“We had the best booking quarter in our history, ever,” said Christopher Nassetta, president and CEO. “And our position is great for the next year.”

The McLean, Virginia-based owner of 22 brands, such as DoubleTree and Waldorf Astoria, continued to see a strong hunger for travel through 2023 and into early 2024.

About 85% of the company’s revenue comes from road warriors at small-to-medium-sized businesses.

“They’re feeling reasonably good about a soft landing [in the economy] and their businesses,” Nassetta said.

Leisure travel remained way over past highwater marks, he said. There were a few exceptions, such a few markets where the comparisons were tough because the destinations like South Florida had been so super-hot immediately as the pandemic eased.

Hilton’s third big revenue driver is group bookings for conferences and other large corporate meetings. Executives said they see a continued upswell in group bookings by big associations. This segment had been the slowest to come back from the pandemic lows, suggesting that the recovery in group bookings will provide an ongoing tailwind for Hilton.

As the next year unfolds, Hilton will steadily face more difficult year-over-year comparisons. Domestic U.S. demand may level off, while international travel may still rise. Hilton has fewer hotels overseas than its rivals, putting it at a disadvantage.

Early signs of this possible moderation were reflected in Hilton’s decelerating increase in revenue per available room, a key industry measure. Revenue per available room was the number-one most mentioned term on Wednesday’s call, mentioned 101 times.

Second-quarter revenue per available room rose a remarkable 12% year-over-year. But the company forecasted that its third-quarter revenue per available room would rise only between 4% and 6% year-over-year.

More deceleration is expected as patterns return to averages. In 2019, executives thought that full-year systemwide revenue per available room growth of 2% to 3% year-over-year would’ve been a good outcome.

“It’s like we’ve been living a little bit in Bizarro World,” Nassetta said on Wednesday. “But … everything’s getting reasonably close to a normalized environment.”

Hilton has been boosting its revenue while keeping its costs down. It has partly increased profit margins by pricing its rooms assertively — even though these high room rates depressed occupancy in the second quarter by about 4 percentage points from the pre-pandemic highwater marks.

“We feel good about our pricing power,” Nassetta said. “The core pricing of our