Hilton Sees Solid Pipeline Growth in Q1

MCLEAN, VA—In the first quarter, Hilton expanded its development pipeline by approving 29,300 new rooms, growing to more than 371,000 rooms.

For  Q1, system-wide comparable RevPAR grew 1.8%, driven by increases in both ADR and occupancy. Management and franchise fee revenues increased 12% during the three months ended March 31 as a result of RevPAR growth of 1.7% at comparable managed and franchised hotels, increased licensing and other fees and the addition of new properties to Hilton’s portfolio.

For the three months ended March 31, diluted EPS was $0.54 and diluted EPS, adjusted for special items, was $0.80 compared to $0.51 and $0.69, respectively, for the three months ended March 31, 2018. Net income and Adjusted EBITDA were $159 million and $499 million, respectively, for the three months ended March 31, 2019, compared to $163 million and $445 million, respectively, for the three months ended March 31, 2018.

Development
In the first quarter, Hilton opened 85 new hotels totaling 12,100 rooms and achieved net unit growth of 10,000 rooms, a 41% increase from the same period in 2018.

As of March 31, 2019, Hilton’s development pipeline totaled nearly 2,480 hotels consisting of over 371,000 rooms throughout 108 countries and territories, including 37 countries and territories where Hilton does not currently have any open hotels. Additionally, 200,000 rooms in the development pipeline were located outside the U.S., and 193,000 rooms, or more than half, were under construction.

During the quarter, Hilton added several notable properties to its system, including further expansion of its luxury and lifestyle portfolio with the openings of the Conrad Washington, DC, Conrad Hangzhou in China and Canopy by Hilton Minneapolis Mill District.

In February 2019, Hilton launched its newest brand, Signia Hilton, a dynamic, meetings-and-events-focused brand. Signia will further reinforce Hilton’s commitment to innovation that meets the evolving needs of today’s travelers and will bring premium experiences to top urban and resort destinations around the world. The brand will debut with the openings of the Signia Hilton Orlando Bonnet Creek, Signia Hilton Atlanta and Signia Hilton Indianapolis.

Balance Sheet and Liquidity
As of Q1, Hilton had $7.4 billion of long-term debt outstanding, excluding deferred financing costs and discount, with a weighted average interest rate of 4.46%. Excluding finance lease liabilities and other debt of Hilton’s consolidated variable interest entities, Hilton had $7.2 billion of long-term debt outstanding with a weighted average interest rate of 4.41%.

Total cash and cash equivalents were $461 million as of Q1, including $79 million of restricted cash and cash equivalents. As of March 31, 2019, Hilton had $50 million outstanding under its senior secured revolving credit facility and a borrowing capacity of $891 million, which includes outstanding letters of credit.

In February 2019, Hilton’s board of directors authorized an additional $1.5 billion for share repurchases under its stock repurchase program. During the first quarter of 2019, Hilton repurchased 3.9 million shares of its common stock at a cost of approximately $296 million and an average price per share of $76.65. From the inception of Hilton’s stock repurchase program in March 2017, Hilton has repurchased approximately 41.7 million shares of its common stock for approximately $3.0 billion at an average price per share of $71.30. The amount remaining under Hilton’s stock repurchase program is approximately $1.7 billion.

In March 2019, Hilton paid a quarterly cash dividend of $0.15 per share on shares of its common stock, for a total of $44 million. In April 2019, Hilton’s board of directors authorized a regular quarterly cash dividend of $0.15 per share of common stock to be paid on or before June 28, 2019 to holders of record of its common stock as of the close of business on May 17, 2019.

Outlook
Share-based metrics in Hilton’s outlook include actual share repurchases to date, but do not include the effect of potential share repurchases hereafter.

Full Year 2019

  • System-wide RevPAR is expected to increase between 1% and 3% on a comparable and currency neutral basis compared to 2018.
  • Diluted EPS, before special items, is projected to be between $2.98 and $3.07.
  • Diluted EPS, adjusted for special items, is projected to be between $3.74 and $3.84.
  • Net income is projected to be between $881 million and $910 million.
  • Adjusted EBITDA is projected to be between $2,265 million and $2,305 million.
  • Management and franchise fee revenue is projected to increase between 7% and 9% compared to 2018.
  • Contract acquisition costs and capital expenditures, excluding amounts indirectly reimbursed by hotel owners, are expected to be between $175 million and $200 million.
  • Capital return is projected to be between $1.3 billion and $1.8 billion.
  • General and administrative expenses are projected to be between $430 million and $450 million.
  • Net unit growth is expected to be approximately 6.5%.

Second Quarter 2019

  • System-wide RevPAR is expected to increase between 1% and 2% on a comparable and currency neutral basis compared to the second quarter of 2018.
  • Diluted EPS, before special items, is projected to be between $0.81 and $0.86.
  • Diluted EPS, adjusted for special items, is projected to be between $0.98 and $1.03.
  • Net income is projected to be between $238 million and $253 million.
  • Adjusted EBITDA is projected to be between $590 million and $610 million.
  • Management and franchise fee revenue is projected to increase between 6% and 8% compared to the second quarter of 2018.

Christopher J. Nassetta, president and CEO of Hilton, said, “We are happy to report a good start to the year with first quarter results that exceeded the high end of guidance for Adjusted EBITDA and diluted EPS, adjusted for special items. We continued to drive impressive market share gains across all brand segments and regions during the first quarter, further increasing our industry-leading RevPAR index premium. We were also excited to launch our newest brand, Signia Hilton. We expect this dynamic and innovative brand to change the meetings and events space and enable us to better serve our guests and owners.”

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