Q4 2024 Hilton Worldwide Holdings Inc Earnings Call
Good morning, and welcome to the Hilton fourth quarter 'twenty 'twenty four earnings conference call.
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Speaker Change: I would now like to turn the conference over to Joe Chapman Senior Vice President head of development operations and Investor Relations. Please begin.
Joe Chapman: Thank you Betsy welcome to Hilton's fourth quarter and full year 2024 earnings call.
Joe Chapman: We begin we would like to remind you that our discussions. This morning will include forward looking statements.
Joe Chapman: Actual results could differ materially from those indicated in the forward looking statements and forward looking statements made today speak only to our expectations as of today, we undertake no obligation to update or revise these statements.
Joe Chapman: For a discussion of some of the factors that could cause actual results to differ please see the risk factors section of our most recently filed Form 10-K.
Chris Nassetta: In addition, we will refer to certain non-GAAP financial measures on this call you can find reconciliations of non-GAAP to GAAP financial measures discussed in today's call in our earnings press release and on our website at IR Dot Hilton Dot Com. This morning Christmas that are our president and Chief Executive Officer will provide an overview of the parent.
Speaker Change: Operating environment and the company's outlook, Kevin Jacobs, our Chief Financial Officer, and President of Global Development will then review, our fourth quarter and full year results and discuss our expectations for the year.
Speaker Change: Following their remarks, we'll be happy to take your questions and with that I'm pleased to turn the call over to Craig. Thank you Jill and good morning, everyone and thanks for joining US today, we're happy to report a great and do another strong year marked by record unit growth in several important milestones, we added new brands and strategic.
Speaker Change: The partnership to meet guest needs, we opened more rooms than in any other year in our history, and we signed a record number of new rooms to our development pipeline all of which further strengthen our network and positioned Hilton for continued growth in 2025 and beyond.
Speaker Change: Thanks to our incredible team members and owners, we also welcomed more than 224 million guests to our properties more than any year in our history.
Speaker Change: For the full year system wide Revpar increased two 7% compared to 2023 with growth across all segments and all major regions solid top line performance, coupled with strong net unit growth drove record adjusted EBITDA of more than $3 4 billion up 11%.
Speaker Change: Year over year, demonstrating the strength of our fee based business model and the power of our growth algorithm significant free cash flow generation enabled us to return $3 billion to shareholders.
Speaker Change: Turning to results for the quarter system wide Revpar increased three 5% year over year above the high end of our guidance range driven by better than expected trends in leisure and continued growth in business transient and group.
Speaker Change: Leisure transient revpar increased 4% driven by solid growth in both occupancy and rate with particularly strong trends throughout December and the quarter leisure occupancy remained five points higher than pre pandemic levels business transient revpar increased more than 3% led by continued.
Speaker Change: Recovery in large corporates with big check and big banks meaningfully outperforming group Revpar rose, 3% year over year as demand for company meetings and social events remains strong.
Speaker Change: Additionally, booking windows continued to lengthen and strong demand and conventions and company meetings drove higher rates for future periods. As we look to the year ahead, we feel incrementally a bit better than we did a quarter ago and expect system wide topline growth of 2% to 3% for 'twenty.
Speaker Change: 25.
Speaker Change: We expect relatively steady growth across the Americas.
Speaker Change: Modest deceleration in EMEA due to that.
Due to tough comparisons following a robust year last year and growth across Asia Pacific given improvements in China and continued strength throughout the rest of the region.
Speaker Change: We also expect positive revpar growth across all major segments with group outperforming driven by continued strength in company meetings and convention business.
Speaker Change: We assume very modest revpar growth in leisure transient given forecast for steady levels of consumer spending and challenging comparisons. We expect continued recovery in business transient driven by further momentum in large corporates, coupled with steady demand across small and medium sized businesses.
Speaker Change: Turning to development, we opened 171 hotels in the fourth quarter totaling nearly 23000 rooms, as our strategic and diversified approach to development continued to drive brand expansion into new markets around the world during the quarter, we opened our first tapestry hotels in Paraguay.
Speaker Change: I, Bonaire and Australia, helping the conversion friendly lifestyle brand to surpass 150 hotels in 20 countries and territories worldwide. We also debuted our curio brand in Romania and opened our first Hampton in Africa true in Colombia Hilton Garden Inn in.
Speaker Change: Grace and spark in Austria.
Speaker Change: In Asia Pacific, we celebrated the opening of our Thousandth hotel ahead of schedule and representing growth of more than 30% versus last year.
Speaker Change: For the full year, we added a record 973 hotels, representing nearly 100000 rooms, and the single biggest increase in rooms, and hiltons more than 100 year history, driving net unit growth of seven 3% conversions accounted for roughly 45.
Speaker Change: Percent of room openings in the year driven by the addition of S. L age properties and continued momentum from spark double tree and our conversion friendly lifestyle brands.
Speaker Change: We're all luxury lifestyle hotels accounted for roughly half of our system wide openings in the year, bringing those portfolio, bringing those portfolios to more than 900 hotels across the world. Additionally, our luxury and lifestyle pipeline mix is nearly two times, our existing supply supporting continued growth.
Speaker Change: And these important segments.
Speaker Change: Even with record openings, our system wide pipeline grew 8% year over year to total approximately 500000 rooms at year end, we signed 154000 rooms in the year up 18% and representing our biggest year of signings to date. We also ended the year with several notable.
Speaker Change: Signings, including the Waldorf Astoria, Bahrain, Waldorf Astoria, Al Medina, and Saudi Arabia, Conrad in Los Cabos, and our first motto in China and agreements to W. Alex our curio and Hampton in Morocco.
Speaker Change: Construction starts for the year remains strong the highest in our history, increasing 10% year over year, excluding acquisitions and partnerships with meaningful growth across all regions.
Speaker Change: We finished the year with nearly a quarter million rooms under construction, which is more than any other hotel company. This represents more than 20% of industry share of rooms under construction and nearly four times our existing share of supply.
Speaker Change: With nearly half of our pipeline under construction and continued growth in conversion opportunities, we feel confident in our ability to deliver strong net unit growth of 6% to 7% in 2025 defined by our continued focus on geographic and chain scale diversity, we have exciting.
Speaker Change: Element opportunities ahead lives Smart studios as is slated to open its first locations. This summer following the recent opening of Sparks 100th Hotel. The brand has several international market debuts, including India and the caller region scheduled for this year, we expect.
Speaker Change: Our newly announced strategic licensing agreement with olive by embassy to accelerate Sparks expansion in India.
Speaker Change: Presenting an exciting opportunity to tap into the country's growing middle class. We also expect continued momentum in luxury with several noteworthy openings in 2025, including the iconic Waldorf Astoria in New York following an extensive and thoughtfully designed renovation the three.
Speaker Change: 375 room hotel will usher in a new era of luxury for New York City. This year. We will also welcome Waldorf Astoria properties in Costa Rica, Shanghai Osaka in Morocco. In addition to Conrad hotels in Athens and Hamburg.
Speaker Change: Cigna celebrated an important milestone just last week with the opening of the brand's first hotel outside the U S. Located in Amman, Jordan. The property offers another sought after location for business and leisure travelers.
Speaker Change: Demonstrating our continued commitment to meeting the evolving preferences of our guests.
Speaker Change: We recently announced several new wellness renovations in January we expanded our partnership with peloton to provide guests with complimentary access to our collection of peloton <unk> on demand fitness content.
Speaker Change: On our in room Tvs. We also recently partnered with Com, a leading wellness company to offer guests access to guided meditation sleep stories, calming soundscapes and mindfulness exercises directly from their in room Tvs.
Speaker Change: To our incredible team members around the world, we continue to be recognized for our culture. During the fourth quarter, we celebrated our eighth consecutive year as the top hospitality company on the world's best workplaces list by great great place to work.
Speaker Change: Our brands also continue to receive recognition. Most recently bought by entrepreneur magazine's franchise 500 for the 16th consecutive year of Hampton took the number one spot in the lodging category. Thanks to its strong preference global growth and guest loyalty.
Speaker Change: In total 12 of our brands receive recognition underscoring the value they drive for owners and guests and our leadership in franchising and innovation across the hospitality sector.
Speaker Change: Overall, we're very pleased with our performance and proud of the record growth. We delivered last year, our powerful network of brands continues to be an engine of opportunity for all of our stakeholders given our strong momentum robust pipeline and resilient fee based business model. We are confident that we are well positioned to.
Speaker Change: Continued driving strong performance in 2025 and beyond now I'll turn the call over to Kevin give you a little bit more details on the quarter and our expectations for the year.
Kevin Jacobs: Thanks, Chris and good morning, everyone. During the quarter system wide Revpar grew three 5% versus the prior year on a comparable and currency neutral basis growth was growth was largely driven by occupancy gains in leisure and continued recovery in group and business transient adjust.
Kevin Jacobs: Adjusted EBITDA was $858 million in the fourth quarter up 7% year over year and exceeding the high end of our guidance range outperformance was largely driven by better than expected revpar growth lower corporate expense and timing items management and franchise fees grew 5% year over year ahead of our expectations. Despite an FX drag.
For the quarter diluted earnings per share adjusted for special items was $1 76.
Kevin Jacobs: Turning to our regional performance fourth quarter comparable U S. Revpar was up two 9% driven by strong leisure demand and continued improvement across business transient and group for full year 2025, we expect U S. Revpar growth at the low end of our system wide range.
Kevin Jacobs: In the Americas outside the U S fourth quarter Revpar increased eight 1% year over year, driven by increased air capacity to the region and strong leisure trends during the holidays.
Kevin Jacobs: For full year 2025, we expect revpar growth in the mid single digit range.
Kevin Jacobs: In Europe, Revpar grew six 2% year over year in the fourth quarter, largely driven by double digit revpar growth in group for full year 2025, we expect low to mid single digit Revpar growth. Following the region strong performance in 2024.
Kevin Jacobs: In the Middle East and Africa region, Revpar increased eight 4% year over year supported by key events, including Cop 29 in Baku, and Formula one races in Qatar and Abu Dhabi.
Kevin Jacobs: For full year 2025, we expect revpar growth in the mid single digit range.
Kevin Jacobs: In the Asia Pacific region fourth quarter, Revpar was up one 7% year over year Revpar in APAC ex China increased eight 8% led by strong leisure performance in southeast Asia during the holiday season.
Kevin Jacobs: Revpar declined 4% in the quarter as softer macro conditions in outbound travel continued to weigh on performance, however trends improved sequentially versus the third quarter, driven by Golden week, and an uptick in demand following fiscal stimulus with positive momentum carrying into the new year for full year 2025, we expect revpar growth in Asia Pacific.
Civic to be in the low to mid single digit range, assuming low single digit growth in China.
Kevin Jacobs: Turning to development as Chris mentioned for the full year. We grew net unit seven 3% and ended the year with over 498000 rooms in our pipeline, which was up 8% year over year with more than half located outside the U S and nearly half under construction.
Chris Nassetta: Looking to the year ahead, we are excited about our strong development story and the robust demand for Hilton branded products in both the U S and international markets.
Chris Nassetta: Moving to guidance for the first quarter, we expect system wide revpar growth of two 5% to three 5% year over year, we expect adjusted EBITDA of between $770 million and $790 million and diluted EPS adjusted for special items to be between $1 57 and.
Chris Nassetta: And $1 63.
Chris Nassetta: For full year 2025, we expect revpar growth of 2% to 3% we forecast adjusted EBITDA of between $3 7 billion and $3 $74 billion and diluted EPS adjusted for special items of between $7 71 and.
And $7 82.
Chris Nassetta: Please note that our guidance ranges do not incorporate future share repurchases.
Chris Nassetta: Moving on to capital return, we paid a cash dividend of <unk> 15 per share during the fourth quarter for a total of $150 million in dividends for the year.
Chris Nassetta: For full year 'twenty 'twenty, four we returned $3 billion to shareholders in the form of buybacks and dividends.
Chris Nassetta: In the first quarter, our board authorized a quarterly cash dividend of <unk> 15 per share for the full year, we expect to return approximately $3 $3 billion to shareholders in the form of buybacks and dividends.
Chris Nassetta: Further details on our fourth quarter and full year results can be found in the earnings release, we issued earlier. This morning. This completes our prepared remarks, we would now like to open the line for any questions. You may have we would like to speak with as many of you as possible. So we ask that you limit yourself to one question can we have our first question. Please.
Chris Nassetta: We will now begin the question and answer session to ask a question you May Press Star then one on your Touchtone phone.
Chris Nassetta: If youre using a speakerphone please pick up your handset before pressing the keys.
Chris Nassetta: Is it any time your question has been addressed and you would like to withdraw your question. Please press Star then two.
Speaker Change: The first question today comes from Shaun Kelly with Bank of America. Please go ahead.
Speaker Change: Hi, Good morning, everyone, Chris I wanted to build off of <unk> mentioned that you made in your prepared remarks, just a bit more of a macro one here to start but.
Speaker Change: We obviously just went through a major U S election cycle since our last call in our last update you've undoubtedly spoke with a number of hotel and business leaders and you said that you said you sounded a little bit more confident than where we were a quarter ago. So can you just expand on that comment a little bit what are some of those conversations with business leaders looking like right now and maybe what segments.
Speaker Change: The lodging business could we expect.
Speaker Change: This summer.
Speaker Change: Some of the sentiment improvement to possibly impact. Thank you yeah, Yeah happy I assumed somebody would ask me that I'm glad we're getting through it early and obviously these are just my opinions, but that's what you're that's what you're asking for.
Speaker Change: And most of this I think would not surprise you.
Speaker Change: Anybody in the sense of sort of the the general view on what's going on in the macro I mean, if you go back a quarter ago.
Speaker Change: We hadn't gotten to an election, there was a lot of noise around the election, and there was a lot of uncertainty around the outcome of the election at the at that time and that uncertainty then translate it didn't do a whole bunch of uncertainty around things that people care about you know the you know whether that.
Speaker Change: Consumers from a leisure point of view and certainly business and group ends up being a lot you know a very directly related to business with huge amounts of uncertainty on.
Speaker Change: Regulatory spending regulatory immigration border tax policy and the practical reality is not just you know sort of the uncertainty around the election, but the uncertainty around all of those outcomes means that people sort of you know husband, there capital a little bit more.
Speaker Change: They are they pulling their their rain pull the reins in a little bit there a little bit more tepid I think broadly.
Speaker Change: And spending so fast forward to today, we have an election that is complete.
Speaker Change: Whether you like it or not it was pretty dispositive it wasn't like close it wasn't disputed.
Speaker Change: You know we knew in a day and are not even a day.
Speaker Change: And while there is certainly a lot of noise you know in a cycle of you know things that are going on by Yo and everything else and living in Washington Trust Me I hear a lot of the noise.
Speaker Change: I live inside the beltway.
Speaker Change: I think there is a broader belief and I'll get to what I'm hearing from other leaders that will go nameless. There is a broad belief and I would say.
Speaker Change: Fairly consistent.
Speaker Change: Amongst the other folks that I talk to across a broad range of industries.
Speaker Change: That.
Speaker Change: People think that the opportunity for economic growth in the short to intermediate term will be better that doesn't mean that people don't think that there's noise and some people appreciated more than others. You know in terms of the various things that are going on but I think.
Speaker Change: Almost to a person that I'm talking to really quietly I think people feel like youre going to see there is an opportunity for a pick up more broadly and in economic growth and and that there is an opportunity you know I think in our business as a result.
Speaker Change: You know for you know for a bit of an uptick which is why I said I feel a bit better why because you have an election behind you one while there's a lot of noise youre going to be in a lighter regulatory environment across the board financial services broad range of industries too you know too.
Speaker Change: Tax policy I mean unclear, it's going to take time, we're all reading about it. This morning, you know one reconciliation build two we're gonna be debating it and Trust me you know we're talking to a lot of people about it it's gonna be unclear when exactly how it happens, but it sort of has to happen and I think you know the certainly the business community is much more optimistic.
That you know that that's going to get done in a way that is favorable and so again across the board as I talk to.
Speaker Change: Folks, but by the way talk to friends and you know thinking about you know as it affects the leisure business, but certainly talking to the folks that are running businesses across a broad range of industry I really can't think of one that doesn't mean, it didnt happen, but it's not in my memory set of.
Speaker Change: Somebody that thought that this is gonna be net what's happening is negative for broader economic growth. So that's why I feel a bit you know a bit more positive now there is a lot of noise right, particularly in the beginning so the reason that we're not you know in our guidance and all of those things not going crazy.
Speaker Change: In terms of you know building you know big upside is because there's there's a lot happening and it's early and I think we need to see how these these sort of things play out, but I think the general sentiment I've said it is underneath it all when you live.
Speaker Change: Say above at all when you lift.
Speaker Change: Up above all the noise is that this is going to be good for the U S economy and to a degree.
Speaker Change: That will have some knock on impact in various economies around the world as a result.
Speaker Change: Thank you very much.
Speaker Change: Okay.
Speaker Change: The next question comes from Stephen Grambling with Morgan Stanley. Please go ahead.
Stephen Grambling: Hey, Thank you despite the positive business demand outlook coming out of Dallas. It seemed like there was a lot of skepticism around the development.
Speaker Change: Backdrop, just given where returns are versus interest rates, yet you sound pretty positive on the development pipeline clearly your pipeline has been growing so I'm just would love to hear how you think about what has set hilton apart from that much more cautious tone.
Speaker Change: At the industry conference Yeah, I was there not for long, but I did the main paddle on site and we had a big owner reception I think we have 400 owners. So I talked to a lot of people that are in the short time I was there and so not to Steven.
Speaker Change: I appreciate the comment and you were probably there long enough, but I would probably frame it a little bit differently than maybe what I. You know you know sort of like break it down into like.
Speaker Change: What how people felt about M&A activity versus you know, how they're sort of feeling about new development activity and I I would say my read of it again not to take issue with it.
Speaker Change: It was generally.
Speaker Change: On the first M&A much more positive I think people are very much of there's more capital available rates have moved up a bit but I think there's a belief that over the next 12 to 24 months broadly rates will come down I think people feel like the bid in the <unk>.
Speaker Change: Ask is getting closer because you know performance as you know has ticked up a bit and so I sensed and in fact, we were asked on the panel and I think the answer for most of the folks on the panel with me was you know a lot more optimism in M&A in terms of the new development side of it which is I think.
Speaker Change: What you're referencing more there is still a you know a lot of friction for.
Speaker Change: For the reasons that you're describing it.
Speaker Change: During COVID-19 following COVID-19, it got very expensive to build.
Speaker Change: Cost structures went up and so it got hurt and in interest rates went up and capital availability went down and so that's awfully difficult equation for four new construction I sensed actually you know some increasing optimism and so the question is why well again people broader.
Speaker Change: You I think was you know don't want to get ahead of ourselves, but more optimistic about what's going to go on broadly with the economy. So improving performance stabilization of course to build stabilization on labor costs. There are other component costs insurance and others that are still going up but.
Speaker Change: Some stabilization and frankly, the largest part of the expense base. A you know I I believe and I think people are figuring this out and opportunity for.
Speaker Change: For rates as I said over the next 12 months to 24 months to come down inflation is.
Speaker Change: Moderating as we see that as one of the largest components of it.
Speaker Change: Inflation as measured by the.
Speaker Change: Federal government as shelter, which is on a lag and is still showing up that above target levels. When reality of shelter costs are going up at closer to 1%. So as you start to see that dataset factored into that.
Speaker Change: The inflation numbers youre going to see a very large component of inflation come down obviously the administration Super focused on energy and try and try to bring energy cost down which is another large contributor that is broad impact. So I do believe I believe and I think people people are starting to believe that there is an opportunity not a rapid deceleration.
Speaker Change: And in in interest rates there is over the next 12 to 24 months.
Speaker Change: Likelihood that rates are going to come down and then last but not least I do believe people are seeing more availability of capital its not a gusher.
Speaker Change: You know, but I think they're seeing more available ability of capital and I think there is a belief which is what was driving I think again I want to be careful it wasn't raging optimism, but sort of a bit of a shift at least amongst our owner community is that in a world where the regulatory environment is going to get a lot easier.
Speaker Change: On the financial system, which I think is pretty clearly happening.
Speaker Change: In a world where the broader economic growth is stable there.
Speaker Change: Moving up a tick you know that there is going to end up by definition.
Speaker Change: Mission as there always is in that kind of cycle being more capital available because the lending institutions of all sorts are going to have to go further out on the risk spectrum to get their yields and as a result, theyre going to be looking more and more to do build in and that kind of activity in that that's a normal cyclical thing that happens, but I think with the regulatory environment.
Speaker Change: With that we're moving into.
Speaker Change: It will accelerate that so I again, I'm not going to I'm not going to say I am not taking issue with what you were hearing theres certainly a lot of friction and we hear that but I would say I started to sense a movement.
Speaker Change: Two to a more positive place now the last part of it sorry and I'll stop.
Speaker Change: You know why are we doing well why are we doing well how are we defining I you didn't say it but I'll say, it's sort of how are we define gravity in what's been.
Speaker Change: A difficult environment, you know for new construction and develop a generally and I think the answer is two fold. One we I mean, it's all related to our brands are the best performing brands in the industry. So while there isn't as much money I think theres more coming we are getting a very disproportionate chair, we're just more financeable with the mud.
Speaker Change: That's available for new construction and because our brands perform the best in the industry, we get a large disproportionate amount of conversion opportunities I think over the last 12 months were not quite 50% of all conversion opportunities are moving in into our system and so those two things.
Speaker Change: Things you know are uniquely helping have been uniquely helping us over the last couple of years and I think will continue.
Speaker Change: To help us, but I do believe the other things I said as well.
Speaker Change: That's great. Thanks, so much.
Speaker Change: You bet.
Speaker Change: The next question comes from Carlo Santarelli with Deutsche Bank. Please go ahead.
Speaker Change: Hey, Chris Kevin Good morning, Chris.
Speaker Change: You spoke a lot about development and conversions and stuff and I might have missed this you might have said it earlier one of you may have said it but conversions as a percentage of of your unit growth in 'twenty four and then kind of how you see how you see that shaping up for 25, then I just had a quick follow up.
Speaker Change: Yes for 'twenty four if you include everything.
Speaker Change: The acquisitions and partnerships. It was about 45% that was in my prepared comments I think it was and if you take those out it was about a third plus or minus I think this year 25 will be about a third.
Speaker Change: That'd be meeting that we don't we don't have any big play it I mean, there'll be some very modest incremental growth in our existing partnerships, but I would I would view that in at our scale is sort of a rounding error.
Speaker Change: And so you know we're going to go back to sort of more normally where we'd be which is elevated from the mid twenty's into the low to mid thirties, but you know not not up where we were last year and what was the last part.
Speaker Change: The second part I just had a follow up.
Speaker Change: The <unk>.
Speaker Change: You look at your guidance, obviously first quarter Revpar guidance, a little bit better than the full year.
Speaker Change: Adjusted EBITA guidance obviously.
Speaker Change: We're facing a challenging comparison.
Speaker Change: Was there were there some I don't want to say abnormalities, but some one offs that will benefit in the <unk> 24 that youll kind of have to lap just looking at kind of the midpoint of your adjusted EBITDA growth.
Speaker Change: Year over year is looking like 45% versus kind of eight 5% for the full year. So I just wanted to get a little bit of color on some of the moving parts for the first quarter.
Speaker Change: Yes, you hit on it Carlo it is a tougher comp and that was driven by a couple of onetime items and then you've got some FX impact in the first quarter. If you adjust for all that it's basically in line with algorithm.
Speaker Change: Great. Thank you guys sure.
Lizzie Dove: The next question comes from Lizzie Dove with Goldman Sachs. Please go ahead.
Lizzie Dove: Hi, there. Thanks for taking the question I know that Alice one, but it seems like youre defying gravity, a little bit on the cost side to it you know the great EBITDA guide yet at Alice last week. There was a lot of talk around cost pressures in the industry, particularly on the insurance side. The wage side you may be talk about just how you're thinking about that broadly and any initiatives you have to offset it.
Lizzie Dove: Yeah listen I think if you're talking about us in our in our cost structure. We continue to be very disciplined in our GAAP G&A guide for the year you probably noticed is even slightly lower than 2019. After six years of of cost inflation I you know I think on the on the operating side as you say with owners you know yeah. There are some cost pressures.
Lizzie Dove: And we have you know we just have to keep we are and we will continue to work for our owners to try to find as many operational efficiencies as we can so that so that they can grow their bottom lines as well and doing the best we can on wages and benefits doing the best we can on insurance, just helping them with operating efficiencies across the board. So you so I'd actually Miss Dallas This.
Lizzie Dove: Year, So, but my guess is you were hearing a little bit from the ownership side on cost pressures and then for US. We just continue to remain disciplined.
Lizzie Dove: Okay.
Speaker Change: We'll take the next question. The next question comes from David Katz with Jefferies. Please go ahead.
David Katz: Good morning, everybody Thanks for Sigma.
Lizzie Dove:
Speaker Change: And it does appear that you are making some good traction in the luxury side of things.
Lizzie Dove: Also observed.
Lizzie Dove: Some of the capital deployed it was up a bit this year and obviously, what we're hearing.
Lizzie Dove: No around analysis.
Lizzie Dove: Checks people writing for luxury hotels are growing up can.
Lizzie Dove: Can you just give us a little more depth into sort of <unk>.
Lizzie Dove: How youre thinking about that obviously the strategy is getting some traction.
Lizzie Dove: But balancing that with some of the capital required to play in that segment. Thanks.
Lizzie Dove: Sure I mean, I think if you think about it it depends on where you are in the world. We are getting a ton of traction in luxury and depending on where you are in the world capital contributions from the operator can be can be higher or lower in the western world. They tend to be higher in that space, It's probably worth noting that a bunch of our traction in luxury at least last year came from the SL H partnership which was completely capital light.
Lizzie Dove: Zero contribution on our part.
Lizzie Dove: You are hearing about some deals up there you're out there as you get into the higher end of the range.
Lizzie Dove: Particularly in luxury there are more competitors right in our bread and butter in the mid market, depending on where you are in the location you know maybe the list of brands that you want to play with is two or three and we might be at the top of that list. When you get into the higher end of the range in luxury and the higher ends of full service that that the number of brands.
Lizzie Dove: You know in the aperture opens up pretty wide and so the laws of supply and demand are alive and well. So it creates a lot of demand for key money with all of that said, we still only contribute key money on 10% or less of our deals. We do play in in some of those deals because they are important and they tend to be from time to time higher checks, but I think if you look at what we do versus our competitors.
Lizzie Dove: I'll take our track record.
Lizzie Dove: Against anybody's any day and then the last thing is you talked about a little bit of the trajectory. You know last year was a little bit light I would say there are a couple of deals out there where the timing is kind of pushed into 2025, so youre seeing that a little bit in our guidance and our guidance for this year is right in line with what we said at the Investor Day $2 50 to 300, I think that's the right way to think about it on a run rate.
Lizzie Dove: Basis.
Lizzie Dove: Yes.
Lizzie Dove: And Thats, where all capex, including key money.
Lizzie Dove: Thank you.
Lizzie Dove: Sure.
Speaker Change: The next question comes from Robin Farley with UBS. Please go ahead.
Robin Farley: Great. Thank you. So obviously, great Q4 result in better 25, Revpar guidance, then that a quarter ago.
Robin Farley: I did want to ask about.
Robin Farley: You often talk about the algorithm the growth algorithm being revpar posting across getting to see go ahead, moving higher as you move down the P&L.
Robin Farley: It seems like for 'twenty five that the EBITDA growth rate is a little bit lower than the sort of midpoint of your revpar and unit growth just wondering what maybe going on there sort of wondering if it's tied to you in Q4 it looked like.
Robin Farley: Based on other management fees were down a bit and so is there something there that is sort of continuing into 2025, that's not bringing the.
Robin Farley: That top line growth kind of getting magnify does it move down the P&L. Thanks.
Robin Farley: Yes, Robin it's a good question I'll take the second part first because its a little bit more straightforward answer if you adjust those based on other fees for some one time items and FX. It actually would have been in the high single digits and that was all baked into our guidance for Q4 and the numbers. We gave you and we beat that guidance. So it actually came in a little bit better than we thought so theres nothing nothing going on there other than some timing.
Robin Farley: And some FX and then for the full year 'twenty for you or the midpoint of our guidance is at eight and a half algorithm would suggest nine again, it's the same it's actually the same answer is that as Carlos question earlier on Q4, where if you adjust for some of the onetime items last year and you adjust for FX, we're but we're above algorithm for this year at the midpoint.
And are there any one time.
And importantly, if you go back and looked at even with that if you go back and look at Investor day sort of what we laid out.
Robin Farley: Bottom line EBIT numbers are higher than what we would have laid out a year ago for 2025, even with the FX really is FX. If you take FX out it's above algorithm I mean, either onetime things going on but its really FX.
Robin Farley: But even still even with the FX Bottomline EBITDA is higher than what we presented to everybody.
Robin Farley: Our three year plan and that's because again, we're super disciplined.
Robin Farley: They were super disciplined on the top line. We're also disciplined on our cost structure and so if you think about this business versus 19, we finished last year.
Robin Farley: EBIT margins that are over a thousand basis points higher than the prior peak of 2019. So I think that's a pretty good testament to the discipline that we have been running this business.
Robin Farley: Thank you that's Super Super helpful color.
Speaker Change: Anything you'd call out in terms of those onetime items, just so we can think about that.
Speaker Change: Thinking about the quarterly cadence just sort of any of the big ones you would call out.
Speaker Change: So it's just sort of the lumpy you know there are all sorts of their term fees or all sorts of things that happen in a normal year and they sometimes get weighted in one quarter versus the other in and in this case some of them were weighted in the fourth quarter of 2024 or 23 in the first quarter of 2024 once you.
Speaker Change: Once you get through that those those go away.
Speaker Change: Still have FX, depending on where the dollar goes but that's that all washes away and obviously for the full year washes away given you saw our guidance for the full year.
Speaker Change: Thank you.
Speaker Change: Okay.
Speaker Change: The next question comes from Brian <unk> with Barclays. Please go ahead.
Speaker Change: Good morning, Thanks for taking my question, maybe just following up on that question. Kevin If you could just maybe bridge the rest of the P&L. When we look at the EPS guide versus again, the Investor Day Algo.
Speaker Change: Below that obviously buybacks are not in the full year guide, but it wasn't the.
Speaker Change: The three year algo, but it looked at the bottom end of the EBITDA Guide is right. There in line. It makes sense with your revpar, but it looks like the EPS, a little lower and if you could provide some extra color there I'm sure it'd be helpful. Yeah sure. Brian I mean, you look you mentioned it the big Big driver is buybacks, but that's all that was all factored for and I assume your factory for the other ones just re leveraging right.
Speaker Change: We did $2 billion of financing to re lever the balance sheet to fund or to help fund our buyback program. This past year. We've got you know we've got another about similar amount next year and it's just a little bit higher rates than we had been borrowing at before and so youre, just seeing that catch up flow through to EPS and others other than that.
Speaker Change: If you adjusted for all that we'd be in the mid teens in terms of adjusted EPS growth and while you read levering. It has an impact but longer term. It doesn't have any impact meeting once you stabilize at a certain leverage level than year over year.
Speaker Change: Okay.
Speaker Change: So.
Speaker Change: Excellent thanks, everybody.
Speaker Change: The next question comes from Smedes Rose with Citi. Please go ahead.
Smedes Rose: Hi, Thank you.
Smedes Rose: I wanted to ask you just thinking about maybe just the U S for a moment in your you talked about your Revpar expectations.
Smedes Rose: Our system, but would you.
Smedes Rose: Think about kind of just the luxury or upper upscale full service properties versus select service would you expect to continue to see.
Smedes Rose: More relative weakness on the select service side or any kind of commentary there of what you how you think of Europe, and unfold and maybe what's.
Smedes Rose: What's weighing or supporting your expectations for that segment.
Smedes Rose: No I think smedes that you might have.
Thank you are talking about Q4, or you sound like Q4 relative to chain scale performance.
Smedes Rose: Well and for the year as well I mean, I think most interesting.
Smedes Rose: Yes, it's really just year over year comps right. So I think we I wouldn't we wouldn't call out any any underperformance, we continue to be in line or better than chain scale performance for the full year 'twenty four we're gaining share and we expect that to continue.
Speaker Change: Great. Thank you.
Smedes Rose: Okay.
Speaker Change: The next question comes from Patrick Scholes with true Securities. Please go ahead.
Speaker Change: Thank you.
Speaker Change: Morning, Chris and Kevin Good morning.
Speaker Change: Mark Good morning, well one thing I don't think I've heard you speak about is tariffs.
Speaker Change: And specifically what potentially might be.
Speaker Change: Any impacts.
Speaker Change: Your franchisees or potential developers and builders.
Speaker Change: What what are you hearing from them and the last time I blame tariffs.
Speaker Change: Tariff at the moment could change in a moment is the 10%.
From China, but.
Speaker Change: I would like to hear your thoughts around that potential.
Speaker Change: Yeah.
Speaker Change: Talk about it as you pointed out embedded in your question is are terrorists and then they're not and it's you.
Speaker Change: You know that's sort of moving around a lot.
Speaker Change: So far obviously you know we've talked a lot of people not not any real impact to speak of it depends what happens I do I do believe what's playing out as a series of trade negotiations.
Speaker Change: That are that are delicate and I believe tariffs are a part of the negotiation and part of the strategy to getting to the right kinds of deals and the and so that doesn't mean there won't be tariffs.
Speaker Change: But my guess is that we will end up in most cases and a place where we get some form of trade deal done that will not involve major tariffs and so again I sort of like you know they.
Speaker Change: All of you that know me know I like to lift up above the noise. This hold steady hand on the wheel I think when you lift above at all you know I still believe that the opportunity is broadly even with all the noise of tariffs and I'll come back to supply chain in a second.
Speaker Change: We have broader economic growth, that's better than we thought it was going to be not not worse, even with the risk of various negotiations in short term tariff imposed imposition of short term tariffs.
Speaker Change: One of the things that we've done so so far no impact and frankly not to say it depends what happens that we couldn't have impact, but we've diversified our supply chains in a very aggressive way over the last five years, I mean think about what happened in COVID-19.
Speaker Change: You know like couldn't get things so you know.
Speaker Change: Part of it was driven by the necessity of diversification coming out of Covid, but.
Speaker Change: Then we continued on because we just think it's a really good idea to have various places in the world, where we can get various products. So it's not like we're getting Terry from one place in the world for the whole system.
Speaker Change: No because that would create risk that if you you know had a problem with tariffs in that particular location. It could cause a ripple effect. So I would say again I can't say it would have no impact, but we have done our HSM team has done a terrific job of diversifying.
Speaker Change: Our supply chain and so we feel pretty good I feel pretty good that middle East what's gone on so far in the and the areas that are in question that we have ways to pivot you know given our supply chain relationships and other other parts of the world.
Speaker Change: Okay. Thank you well.
Speaker Change: Wayne.
Speaker Change: Okay.
Speaker Change: The next question comes from Michael Bellisario with Baird. Please go ahead.
Michael Bellisario: Thanks, Good morning, everyone. Good morning, Michael just wondering if there's any commentary you can give on deletions and also what might be falling out of the pipeline any color on how those might be trending and what the returns would be there. Thanks.
Speaker Change: It's a good question.
Speaker Change: We generally remove a point to a point in the quarter of the system every year I mean, it's sort of same answer as we've talked about before Michael most of those are our choice. We did do a little bit more late last year for 2024, then than typical than that run rate, but but everything that's baked into our expectation for 25 is consistent with long term averages.
Speaker Change: Yeah.
Speaker Change: The next question comes from Chad Beynon with Macquarie. Please go ahead.
Chad Beynon: Hi, good morning, Thanks for taking my question.
Chad Beynon: Just wanted to ask about your comment on large corporations traveling more.
Chad Beynon: Kind of that impact on BT and group.
Chad Beynon: Wondering when you started to see that acceleration and now that we have more certainty and some more certainty around policy inside the beltway if that could be a big positive swing factor sequentially.
Chad Beynon: As we kind of work through the next couple of months for the go forward. It certainly could be we are not we are not giving you guidance or forecasted that I would say we saw.
Chad Beynon: Throughout the fourth quarter.
Chad Beynon: You know an uptick and then particularly post election.
Chad Beynon: You know.
Chad Beynon: By mid week strength now you know I think that was based on all the things that I described earlier and People's belief on more certainty on tax regulatory environment.
Chad Beynon: More and more comfort you know spending more I think you know part of it was that the way the holidays fell it compressed the fourth quarter in terms of travel days.
Chad Beynon: And that that gave us a benefit in the fourth quarter, but net net as I said every every CEO I'm talking to.
Chad Beynon: Met with our head of sales.
Chad Beynon: Across all our special corporate account I mean uniformly I think people.
Chad Beynon: Whether it happens in part because of the election, which I think it probably did but it was happening anyway.
Chad Beynon: What a normal cycle of people getting back to office and getting more serious about running their businesses and sort of back to a little bit of a business as usual.
Chad Beynon: Talk to you all accounts, if you talk to large medium small almost.
Chad Beynon: Without exception people are broadly, saying that they're going to travel more okay, and they broadly understand that they're going to pay more for their travel because they understand that the environment that we're living in and so I do think that you know that bodes well for business transient recovery to continue.
Chad Beynon: You know sort of beat our way back to prior obviously rate structures are higher but were still not back to prior levels of demand, but I think by the end of the year. There is certainly a pretty good shot of being able to do that and same same with group and leisure as I commented on in my introductory comments leisure is already way over so I you know I think youll see some.
Chad Beynon: <unk> effect.
Chad Beynon: And between the segments, which will be good.
Chad Beynon: You should want to see and I certainly want to see as you know is business transient demand levels.
Chad Beynon: Recover and that I think will ultimately go beyond prior peaks and core demand you'll be trying to you know sort of.
Chad Beynon: Manage your inventory in a way, where you're taking out lower price segments that would be you know sort of lower rated leisure we want to keep the high graded leisure, but some of the lower rated leisure.
Chad Beynon: Which we're super Super focused on is that it's happening. So it's a long long winded way of saying it was happening in the fourth quarter. It accelerated in you know in a post election world.
Chad Beynon: The trends so far are sort of indicative of the same thing. Although it's early in the year you know youre not youre not you had the holidays falling away where January wasn't you know a barnburner, but I mean, it was fine and in line with our expectations, but people just aren't there.
Chad Beynon: They're just fully get back out on the road, but I suspect we will see.
Chad Beynon: A a bit of a small step change in midweek trap.
Chris Nassetta: Thanks, Chris I appreciate it.
Chris Nassetta: The next question comes from Richard Clarke with Bernstein. Please go ahead.
Richard Clarke: Hi, Good morning, Thanks for taking my question I just wanted to ask about the the dawn of the Gen. II, obviously, the first partners into those AI agents have been the.
Speaker Change: Your line travel agencies booking Tripadvisor etcetera are you talking to those agents would you be happy for OTI to handle your distribution through those agents.
Richard Clarke: Maybe overall do you see that development is good or bad news for Hilton.
Speaker Change: No I mean, we obviously want to.
Speaker Change: Deal with our customers as directly as we can I mean, we do have a percentage of our business that comes through the Otas. It's a relatively small percentage of the business we have good relationships there.
Speaker Change: The better they can serve that customer that we access.
Speaker Change: Through them better for everybody the better experience is always what what what we want and so we.
Speaker Change: We think that's great, but the very large majority of our system.
Speaker Change: This is driven through our direct relationships, we want obviously for that to continue we have done.
Speaker Change: A huge amount of work and how we think about every element of the relationship we have with our customer from the first time that they dream about a trip to exploration.
Speaker Change: Now, how they where they want to go to the booking experience to putting their package together to pre arrival.
Speaker Change: On stay posted rival every element of it and were you know without getting into great detail because it would take a whole day to do it you know we are super engaged in how we use the tools and technology, including AI in every step of that journey to make it a more pleasant.
Speaker Change: And friction free.
Speaker Change: Free experience for our customers and so no. We don't plan to outsource that is the short answer we're doing.
Speaker Change: We're all over it and I think honestly the work we're doing across the board, but particularly with the stay experience in terms of being able to use AI.
Speaker Change: From a data and analytics point of view to understand in great granular detail, what individual customers want and then too.
Speaker Change: Mass customize the experience both ahead of the stay but particularly on stay we have some really really interesting things going on in game changing things there and so we are fully committed to pursuing the continuing our pursuit of direct relationships with our customers.
Speaker Change: Thanks, Chris maybe just to ask a follow up on that can I conclude therefore, you would not allow an open AI agent tour.
Speaker Change: Gemini agent to navigate to Hilton and make a booking on behalf of the customer youre, saying they would have to come direct to do that.
Speaker Change: I like that idea.
Speaker Change: I just said.
Speaker Change: We may work directly with a number of those players and we will work directly with them, but what we're saying is we don't want to work indirectly.
Speaker Change: With some of those players gotcha.
Speaker Change: Understood. Thank you.
Speaker Change: The next question comes from Dan <unk> with Wells Fargo. Please go ahead.
Speaker Change: Hey, good morning, everyone and thanks for taking my question I just wanted to circle back on leisure a bit you guys called out the strong occupancy trends in particularly in December.
Is that mostly in the U S was it was the international and then also you know can you maybe touch on it sounded like that was a bit lower lower rated than higher ready to give me. A note was occupancy and then just one clarification for the first quarter anything to call out in terms of calendar spring break Easter or anything we should be aware of thanks, Yeah I think.
Speaker Change: In the fourth quarter, it was pretty much everywhere and leisure and it had a lot to do with how the holidays fell now that impact some regions more than others, but the holidays fell in a way that stimulated a lot of travel by the way it was across the board it wasn't as low rate.
Speaker Change: Volume wise would've been more low rated but it has stimulated all of rate structures of leisure and then.
Speaker Change: What was the second part of the question holidays holiday in the first quarter you have Easter the big the biggest impact is Easter moving from Q1 to Q2.
Speaker Change: Got it. Thanks, so much other otherwise I mean, you know obviously, there's a lot of noise with the you know, what what fires and storms and snow and all of that best we can tell.
Speaker Change: Sadly, there's a lot of things that go on every year there was enough of that going on in the first quarter of last year that it doesn't strike us yet that there is any real net impact, but Easter moving as a net positive for Q1 are going to be a net negative obviously, that's the primary driver of guidance being a half a point yet in Q1.
Speaker Change: Got it makes sense. Thanks.
Speaker Change: Sure Yep.
Speaker Change: The next question comes from Conor Cunningham with Melius Research. Please go ahead.
Conor Cunningham: Hi, everyone. Thank you.
Conor Cunningham: So positive comments on China today, So I'm just curious if you could kind of unpack that a little bit.
Conor Cunningham: I would imagine that within that low single digit number that you talked about for 2005.
Conor Cunningham: The differences in first half or second half are pretty stark. So if you could just bridge that a little bit and then maybe touch a bit on just development in signings and what's going on in the region in general Thank you.
Conor Cunningham: Yeah sure for China, It's pretty it was pretty consistent last year over the course of the year. It ended up sort of down five ish for the year I think it was down four in the fourth quarter is what I had in my prepared remarks for this year I don't have the quarterly spread exactly in front of me, but I think it's pretty consistent across the board at low single digits, and then development, we're doing great in 2024.
Conor Cunningham: Our approvals or our approvals and starts were both up 10% in our openings in China were up nearly 30% and we continue to do really well sort of across the board and in in chain scales in terms of demand for the products. So the slowdown you're seeing overall in real estate isn't affecting lodging as much and in fact lodging is.
Speaker Change: Our developers are a bit of a beneficiary from who.
Speaker Change: Hotels, particularly mid market hotels, both in a Hilton Garden Inn in our in our Master limited partnership is being a good a good it to reuse for some of the shell residential buildings and shell office buildings that got developed and now need to find a different use in China. So so you know low single digit revpar growth definitely you know a little bit of that.
Speaker Change: Of course on easier comps and do we really know what GDP growth is going to be in China. This year, no, but we feel pretty good about.
Speaker Change: Doing better on the fundamental side and then we're doing great on the development side. The only other thing I'd add China's Chinese are traveling like crazy. So there's there's a whole outbound story, which is China has opened up visa free zones Inter Asia visa.
Speaker Change: These are three zones and so while we still expect China, you know to sort of be tepid positive growth, but tepid as Kevin suggested when you aggregate all the demand for travel coming out of China, It's super beneficial too.
Speaker Change: Our broader and broader APAC business, so like Japan Southeast Asia. They are huge Australasia two degree they're huge beneficiaries of a lot of outbound travel outside of China, but that obviously has the.
Speaker Change: The effect of diminishing.
Speaker Change: Diminishing what's going on within China, but.
Speaker Change: The good news about a big global diversified.
Speaker Change: A company like ours, as we get to pick it up on the other side too.
Speaker Change: I appreciate it thank you very much.
Speaker Change: Ladies and gentlemen, this concludes our question and answer session.
Speaker Change: I would now like to turn the call back over to Christopher <unk> for any additional or closing remarks.
Speaker Change: Thanks again, everybody for joining us we always appreciate the time great questions. Hopefully, we gave you a little bit of context. In addition to our prepared commentary.
Speaker Change: It's an interesting world, but we're as you heard.
Speaker Change: Super optimistic about obviously very happy with how we finished out 24 and 24 overall and optimistic as we go into 2025. So we'll look forward to catch it up with you. After we finished the first quarter. Thanks again have a great day.
Speaker Change: The conference has now concluded. Thank you for attending today's presentation you may now disconnect.
Speaker Change: Okay.
Speaker Change: [music].