Hilton Worldwide Holdings (HLT) reported its fourth-quarter revenue of $2.61 billion, beating Wall Street estimates of $2.57 billion. The company forecasts its full year capital return for 2024 to be about $3 billion, though its profit guidance was lower than Wall Street was expecting. For the first-quarter 2024, Hilton anticipates a net income of $340 million to $359 million. The company also has a number of construction projects in the pipeline, including building over 400,000 new rooms.
Hilton CEO & President, Chris Nassetta, joins Yahoo Finance to discuss his company's performance and what he hopes for the company's growth moving forward.
In terms of costs for these construction projects, Nassetta explains: "While there's less money than there might have been four or five years ago for new development, there is some money and the economics and the underlying business, broadly are good. And then for us, given the ability to drive higher levels of market share and revenues for our owner community are even better. And so people are very anxious to get projects underway, and those that can get financed are doing so, and we expect them to do so at an increasing rate. I do think there will be more money broadly available this year for financing new construction."
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Editor's note: This article was written by Nicholas Jacobino
Video Transcript
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BRAD SMITH: A check-in on the hospitality space as Hilton beat profit estimates for the fourth quarter, delivered some softer 2024 guidance compared to what analysts were expecting. Higher expenses in the tape there, signs of slowing demand for leisure travel, at least compared to international when you comp US versus international in the outlook there. Hilton CEO and President Chris Nassetta joins us now on the company's quarterly results.
Chris, great to have you here with us to really dive further in on these numbers and some of the trends that you're seeing get locked in right now. We're finally eclipsing some of those prepandemic markers. How much of that do you still think is part of this larger trend, and can the company still capitalize on?
CHRIS NASSETTA: I think so. Thanks for having me on, Brad. Listen, last year, we finished the year in a really strong way. We ended up for last year having the highest earnings that we've ever had, the highest margins that we've ever had. We beat fourth-quarter expectations, as you know, handily on top and bottom line.
And we had a huge amount of momentum on the development side signing more deals-- 130,000 rooms last year-- than we ever have. Opening more rooms in the fourth quarter than we ever have in our 100-plus year history. And so we carry a lot of momentum into this year, both on same store growth, which I'll talk about and on unit growth, which is increasing at a good pace coming off the momentum of last year.
You know, what we're seeing in the business in terms of the different segments of travel is actually quite good. You know, what's going on is business transient, which is the biggest segment of our business, continues to strengthen. It's strengthened in the fourth quarter over third quarter numbers.
We expect this year a continuance of that. So it'll continue to get better both in volume and in price. The meetings and events business, which is a decent size, 20% of our business or so, the demand-- because there's so much pent up demand-- is really off the hook strong.
I mean, our group booking pace for the year is up 16%. And so there's just demand. There aren't enough places for people to meet because you went through a generation of hotels that were built without a lot of meeting space being built. And so great demand there. And even leisure, which obviously was stratospheric coming out of COVID, is continuing to grow. I mean, it is not going backwards. There's still the law of demand, and the pricing power is quite good.
So we think all our segments are going to show growth this year in demand and in pricing because here's the other side of the equation, in terms of the laws of economics, there isn't a lot of supply coming in. I mean, our 30-year average of supply in our industry is about 2.5%. And this year, last year, and for the next couple of years, we'll probably deliver as an industry 1% or less. And so the setup is really good for the year, which you can see is reflected in the market's reaction today.
BRAD SMITH: Right. Yeah. As you think about the next couple of years, I can't help but to look at the amount of rooms that you have that are in development and in this pipeline right now. 462,000 rooms in development pipeline. Over half of them under construction you were mentioning on the earnings call. I caught a whiff of it after I got off our 9:00 o'clock to 11:00 show this morning.
One of the huge things, though, that some analysts might be keying in on is what interest rates do for construction and how that impacts the delivery and bringing online fully of some of that pipeline. How do you kind of view it from your standpoint?
CHRIS NASSETTA: Yeah, well, the good news is you're right. We have the highest level of pipeline we've ever had at over 462,000 rooms around half of which is under construction. So that's if it's under construction, it's already been financed. And so what we're seeing is as an industry is very low supply in terms of new hotels.
What we're seeing is a company, because our brands are the strongest performers in the industry, is we're getting a disproportionate share of the things that are getting done. And so we actually saw our starts in the world and in the US move up last year, even in an environment where financing is still reasonably difficult to get and interest rates are higher. And we expect that to continue. We're certainly seeing that in the first quarter.
The answer to why is, listen, our brands are really high-performing brands. They're the most financeable brands. And while there's less money than there might have been four or five years ago for new development, there is some money, and the economics in the underlying business broadly are good. And then for us given the ability to drive higher levels of market share and revenues for our owner community are even better.
And so people are very anxious to get projects underway, and those that can get financed are doing so. And we expect them to do so at an increasing rate. I do think there'll be more money broadly available this year for financing new construction.
Interest rates are actually down. There probably-- they're more to come, but interests rates are down in terms of the borrowing costs for our borrowers off their peak. And at the same time, we're doing more as a percentage of our overall growth in conversion so existing hotels that don't really require financing. I mean, last 30% of our unit growth was conversions of existing hotels. This year it's going to be 35% or more.
BRAD SMITH: And so Chris, just lastly, and I have to hustle to my finish here, but when you think about that capacity reporting out recently this week and a question on the earnings call that Hilton is at least kicking the tires or potentially evaluating a potential acquisition of Graduate Hotels. I don't know if you'll speak directly to that. But what is the determining factor on an acquisition in this environment versus a strategic partnership like you announced with SOH?
CHRIS NASSETTA: Yeah, well I've been consistent if nothing else. Of course, I'm not going to talk about anything that's sort of speculated and rumored in the market. But I've been saying for the 16, almost 17 years I've been running this company, all of which, by the way, throughout all of it, we have not bought anything.
We've done all of our growth through organic brand development. So we had nine brands when I got here. We have 22 brands today. But I've always said consistently that never say never. We look at everything that's available in the market. We always have.
And it has to pass through a very rigorous filtration system of being something that we think is really accretive from the standpoint of our brand portfolio and an offering to our customers and accretive to the value of the company.
So for the last 16 years, nothing has passed through that filter thus we've bought nothing. Right now there's a lot of it. As you pointed out, interest rates are higher. There has been a lot more stress in the environment, and so there's probably a little bit more opportunity not for elephant hunting but for smaller tuck-in opportunities that because of the environment are stressed for us to consider things that might get through the filter.
And so we've always looked at it as-- we've always looked at everything. I think it's just a little bit more opportunity than we've seen. We haven't done it other than a partnership which was not an acquisition with SOH. And if and when we do, you guys will be the first to know, You know. But it's a more interesting environment.
BRAD SMITH: All right, well, we would love the opportunity to help break that news with you. Chris Nassetta, Hilton's CEO, thanks so much for taking the time here today. Appreciate it
CHRIS NASSETTA: Thank you Brad. Great being with you.
BRAD SMITH: Good to see you.
