Hilton Optimistic Business Travel Upturn Will Endure

After a second quarter buoyed by what Hilton Hotels Corp. executives called stronger-than-expected levels of business travel, particularly from the small and midsize segment, CEO Christopher Nassetta said during a Wednesday earnings call that he was “cautiously optimistic” that such demand would continue throughout 2022 and into 2023.

Increased business travel helped drive Hilton’s chainwide weekday occupancy up six percentage points from April to June, Nassetta said, and weekday revenue per available room reached 95 percent of 2019 levels, boosted by higher room rates.

Hilton’s large corporate clients have recovered to about 80 percent of 2019-level business travel volume, Nassetta said, while the small and midsize business sector has been “quite robust.” Revenue, although not occupancy, from these segments should equal 2019 levels in the second half of the year, he added.

Corporate meetings volume is increasing as well, Nassetta said, strengthening each month of the quarter.

Nassetta suggested the increase in business travel is being driven by pent-up demand by corporates feeling pressure to conduct in-person business in a jittery economic environment.

“The anecdotal feedback that we are getting as we go into the fall is people have to travel more—more offices are open, more people are back in the office—while people are worried about where the macroenvironment is going,” Nassetta said. “They have got to run the businesses. And in fact, the more worried they are, the more they realize they [have] got to get out there and make sure they are hustling.”

What’s Next

That increased demand comes as people “are shifting back to a more normalized lifestyle, maybe not exactly the way it was, but it’s more like it was than it was,” Nassetta said. It’s for that reason that Hilton tentatively projects second-half strength in the segment, despite what Nassetta characterized as a slowing US and global economy.

He warned that “the booking windows are short, so our visibility is limited, certainly on transient business. We can’t really look too deeply into the fall on transient.” Still, he said that “July is trending in a very good way, and it will be over ’19 and improve over what we saw in June. So everything we are seeing in real time, everything we have in terms of sightlines into the future , all feel pretty good.”

Hilton projected third-quarter companywide RevPAR to increase 1 percent to 5 percent over 2019 levels, and 25 percent to 30 percent year over year.

Q2 Results

Hilton second-quarter systemwide occupancy increased 12.3 percentage points year over year to 70.8 percent. US occupancy increased 10.4 percentage points to 74.3 percent. Systemwide RevPAR increased 54.3 percent to $109.62, with US RevPAR up 47.3 percent to $120.52. Hilton’s second-quarter average daily rate increased 27.5 percent year over year to $154.92, with US ADR up 26.8 percent to $162.16.

Total second-quarter 2022 revenue increased to $2.24 billion from $1.33 billion one year earlier. Net income increased to $367 million from $128 million for the same period.

Hilton added 14,400 rooms to its system during the quarter, with a net gain of 13,300 rooms. At the end of June, the company’s development pipeline totaled nearly 2,780 hotels representing more than 413,000 rooms, according to Hilton.

RELATED: Hilton Q1 results

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