Hilton Sees Signs of Pandemic's Pent-Up Demand Moderating in 2023

25.08.2023 - 14:22 / skift.com / Sean Oneill / Chris Nassetta

Hilton Worldwide’s earnings report on Thursday was a good news-bad news story.

In good news, the owner of 19 brands, such as Waldorf Astoria and DoubleTree, continued to see a strong hunger for travel through the end of 2022 thanks to a post-pandemic surge in trips. The stock price for the McLean, Virginia-based company surged to a nine-month high in reaction.

But in bad news, the hotel operator predicted that 2023 would bring respectable but more muted growth as the industry will return to a normalized trajectory. The company also reported unusually soft signings for its pipeline of new properties.

Hilton’s fourth quarter system-wide revenue per available room — a key industry metric — was $102, the company said. That was 7.5 percent above the level in the comparable period in 2019, making for the second consecutive quarter that the figure surpassed pre-pandemic levels.

“Small and medium-sized businesses remained an important and growing part of our business travel segment, accounting for roughly 85 percent of our segment mix,” said Chris Nassetta, president and CEO, in a call with analysts on Thursday.

The company said it sold guest rooms, ballrooms, and all-inclusive resort bookings at higher rates because of booming travel demand.

In the fourth quarter, the hotel operator produced $333 million in net income on $2.44 billion in revenue. For the full year of 2022, the company produced $1.255 in net income off of $8.77 billion in revenue.

The company forecast that in 2023 it would produce a net income of between $1.38 billion and $1.45 billion, representing management’s faith that the U.S. and Europe will either dodge recessions or not have recessions damper travel demand. It expects it will push revenue per available room up between 4 and 8 percent year-over-year on a comparable and currency-neutral basis.

This would be a nicely profitable course, but it would be modest comedown from a lofty 2022 performance.

In a perhaps telling sign the sector may return to normality by year-end, Hilton declined to give a 2019 comparison for its 2023 guidance for revenue per available room.

Some context: Americans will have have spent down about two-thirds of the additional savings they piled up during the pandemic by the end of 2023, according to a forecast by Goldman Sachs. That may take the air out of the full robustness of the pandemic rebound.

But Hilton is betting on shifts in consumer spending patterns.

“You continue to see consumers shifting how they’re spending their money,” Nassetta said. “So maybe they’re spending a little bit less, but how they’re spending it, it continues to be shifted more towards experiences, and we’re sort of Exhibit A on the experience side. … We don’t see [leisure travel