Adjusted EBITDA: $795 million in Q1, up 6% year over year. Adjusted EPS: $1.72 for Q1. System-wide RevPAR Growth: 2.5% year over year. Net Unit Growth: 7.2% in Q1. Development Pipeline: Over 503,000 rooms, up 7% year over year. Management and Franchise Fees Growth: 5% year over year. Dividend: $0.15 per share in Q1, totaling $37 million. Full-Year 2025 RevPAR Growth Expectation: 0% to 2%. Full-Year 2025 Adjusted EBITDA Guidance: $3.65 billion to $3.71 billion. Full-Year 2025 Adjusted EPS Guidance: $7.76 to $7.94. Capital Return Expectation for 2025: Approximately $3.3 billion in buybacks and dividends.

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Release Date: April 29, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

Hilton Worldwide Holdings Inc (NYSE:HLT) exceeded expectations for adjusted EBITDA and adjusted EPS in the first quarter of 2025. The company reported a 2.5% year-over-year growth in system-wide RevPAR, driven by strong group bookings and urban market performance. Hilton Worldwide Holdings Inc (NYSE:HLT) achieved a net unit growth of 7.2% with 186 new hotel openings, representing a 20% year-over-year increase. The development pipeline expanded to over 503,000 rooms, with a 7% year-over-year increase and significant international growth. Hilton Worldwide Holdings Inc (NYSE:HLT) was named the number one best company to work for in the United States by Great Place to Work and Fortune for the second consecutive year.

Negative Points

Broader macroeconomic uncertainty intensified in March, leading to pressured demand, particularly in the leisure segment. Second quarter RevPAR is expected to be approximately flat year-over-year due to ongoing macroeconomic uncertainty and the Easter holiday shift. Leisure-transient RevPAR growth was only 1%, with softening demand patterns as the quarter progressed. Short-term bookings have remained roughly flat year-over-year, indicating a wait-and-see approach from travelers. RevPAR in the Asia Pacific region was flat year-over-year, with a decline in China due to strong outbound travel during Chinese New Year and tough year-over-year comparisons.

Q & A Highlights

Q: What is your perception of the setup around the much-feared recessionary environment, and what are some of the things you are seeing that give you pause or remind you of prior times? A: Christopher Nassetta, President and CEO, explained that while there is a lot of uncertainty in the current environment, he believes the market is overly weighted to the downside. He noted that the underlying economy remains strong, with solid employment and corporate balance sheets. Nassetta is optimistic that legislative progress and trade deals could stabilize the situation by the second half of the year, reducing uncertainty and allowing economic strength to shine through.

Story Continues

Q: How is the current uncertainty affecting the development landscape, particularly regarding trade and tariffs? A: Christopher Nassetta stated that while there is some caution among developers due to uncertainty, there has been no significant impact on Hilton's development pipeline. The company continues to see strong momentum in conversions and new constructions, with a robust pipeline of over 1.5 million rooms. Nassetta emphasized that Hilton's development community is optimistic and committed to moving projects forward.

Q: If the economy takes a downturn, where would you expect to see deterioration first, and what actions would you take to improve competitive positioning? A: Christopher Nassetta highlighted Hilton's resilient business model, with a capital-light structure and high margins. He expressed confidence in the company's ability to navigate downturns, citing past experiences where Hilton outmaneuvered competition during challenging times. Nassetta emphasized that Hilton is prepared for any eventuality and will focus on leveraging its strengths to deliver better performance and growth.

Q: Can you provide more color on the economic intensity of deals in APAC and China, and what you're seeing on the ground development-wise? A: Kevin Jacobs, CFO, explained that Hilton's joint ventures in China, such as those for Hampton and Hilton Garden Inn, involve shared economics but no capital investment. These deals have been successful in building brand presence. Outside of joint ventures, Hilton's deals in China and other regions are at market rates, with full fees and no capital investment, contributing to fee growth.

Q: How are you seeing Group bookings and performance for the rest of the year? A: Christopher Nassetta noted that Group bookings are expected to lead segment growth, with mid-single-digit increases in position. While there has been some impact on booking patterns due to uncertainty, the overall Group position remains strong. Nassetta expressed confidence that Group will outperform other segments, supported by a solid position on the books and continued demand.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

This article first appeared on GuruFocus.

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