• New Hilton brands under ‘heavy’ development

Hilton’s CEO used the group’s third-quarter earnings to announce that it expected to launch “two or three” of its four new brands next year.

The comments came as the company upgraded its full-year outlook, but saw performance in the US increasingly at odds with the rest of the world.

Chris Nassetta, president & CEO, told analysts: “We have four new brand ideas under heavy development. Our sort of Hilton Plus brand, an urban micro brand, the luxury collection brand and luxury lifestyle. I would expect probably the launch of two or three of those four during 2018.”

Year-to-date the company has opened nearly 300 hotels, commenting that it remained on track to deliver net unit of approximately 6.5% for the full year. With over half its pipeline already under construction, it added that it had good visibility into its unit growth, and expected net unit growth of around 6.5% again next year.

The group’s pipeline reached 335,000 rooms in the quarter, up close to 13% year-on-year, representing 40% of existing supply. The Asia-Pacific region represented Hilton’s largest growth opportunity with roughly 400 hotels totalling over 90,000 rooms, with the region accounting for a quarter of its pipeline.

Kevin Jacobs, CFO, said: “For us, in terms of our brands, you still have the core Hilton brand and Hampton that are the largest part of the pipeline. But of course, we have new brands that are ramping quickly with Tru and some of our conversion brands.”

The group used the opportunity of its results to announce The Admiralty Arch Waldorf Astoria in London, at the entrance to Pall Mall, facing Buckingham Palace. Following an extensive refurbishment programme, the hotel plans to open in 2022 with 96 rooms and three restaurants.

Commenting on the current business cycle, Jacobs said: “The industry consultants predict that 2019 is going to be the peak year. I think 2018 and 2019 will be about the same and then you’ll see them be a collective peak.”

The company saw mixed results across the globe, with revpar in the US down 0.1% on the year for the quarter, but up 8% in Europe and 8.3% in Asia Pacific. System-wide it rose by 1.3%. Jacobs said: “Assuming a similar cadence for the remainder of the year we expect system-wide revpar to come in at or slightly above the midpoint of our 1% to 3% guidance range. So far in October, which contributes approximately 40% of the quarter system-wide revpar is slightly ahead of expectations.

“Supply remains modest and with U.S. supply growth forecasted at around it’s 30 year average. Given that set up we should have a similar level of pricing power next year leading to 2018 system-wide revpar growth guidance of 1% to 3%.”

The group raised its adjusted Ebitda guidance for full year 2017 to between USD1.92bn and USD1.94bn, an increase of USD30m at the midpoint.

Hilton also commented on plans to invest further in technology, with USD20m to USD40m of its USD150m to USD200m in capex being earmarked for corporate systems. Nassetta added that the group’s book direct campaign was “going really well” adding: “We continue to see tremendous growth coming in through Honors, which is the way to get started. We’ve been doing more than 1 million new members a month. We’re up to about 70 million numbers. We’re almost up 30, I think it’s 26% to 27% year-to-date growth in Honors.

“If you look at the channel shift over the last couple of years, the highest growth that we’re seeing on a year-to-date basis continues to be in our direct channels. We think it will ultimately drive distribution cost down.”

Updating analysts on the group’s new cancellation policy, Jacobs said: “We’re now at a combination of 48 and 72 hours depending on the market. It’s early days, but the early returns are that those are working, those are helping stem the tide of really short-term cancellation.”

HA Perspective [by Katherine Doggrell]: Hilton is now fully unleashed from its pesky ownership arm (which is itself unleashing from many of its Hilton-branded hotels) and it’s onwards to the glorious realm of the brands, under heavy-development all.

The ‘urban micro brand’ is currently subject to the greatest speculation, with hopes that the hostel brand will hold its own in what is currently at the forefront of innovation in the sector.

Backing all these brands will be the technology to do the job and, for the first time in this correspondent’s memory, Nassetta made a point of highlighting the company’s investment and not a moment too soon, with the group being fined USD700,000 for mishandling credit card breaches.

Of course, one operator which has also been pushing the importance of technology is InterContinental Hotels Group, which is working alongside Amadeus. Here at Hotel Analyst we continue to fall prey to those who would whisper to us of a merger between IHG and Hilton. A problem shared is a problem halved, we hear.

Share →