Hotel company Hilton (NYSE:HLT) fell short of the market’s revenue expectations in Q1 CY2025 as sales rose 4.7% year on year to $2.7 billion. Its non-GAAP profit of $1.72 per share was 7% above analysts’ consensus estimates.
Revenue: $2.7 billion vs analyst estimates of $2.72 billion (4.7% year-on-year growth, 0.9% miss)
Adjusted EPS: $1.72 vs analyst estimates of $1.61 (7% beat)
Adjusted EBITDA: $795 million vs analyst estimates of $784.1 million (29.5% margin, 1.4% beat)
Management raised its full-year Adjusted EPS guidance to $7.85 at the midpoint, a 1.1% increase
EBITDA guidance for the full year is $3.68 billion at the midpoint, in line with analyst expectations
Operating Margin: 19.9%, in line with the same quarter last year
Free Cash Flow Margin: 16.1%, up from 12.8% in the same quarter last year
RevPAR: $103.59 at quarter end, in line with the same quarter last year
Market Capitalization: $57.76 billion
StockStory’s Take
Hilton’s Q1 results reflected macroeconomic headwinds, with management citing softer leisure demand impacting system-wide RevPAR growth, which came in at the low end of guidance. CEO Chris Nassetta noted strong group bookings and resilient small/medium business travel provided support, but leisure transient demand slowed as the quarter progressed due to economic caution. Nassetta stated, “Travelers are largely in a wait-and-see mode.” Looking ahead, Hilton raised its full-year non-GAAP EPS guidance but moderated RevPAR expectations, forecasting flat to 2% growth. Management expressed confidence in long-term growth via its asset-light model and expanding global pipeline, despite ongoing volatility. CFO Kevin Jacobs highlighted continued strength in development and non-RevPAR fees.
Key Insights from Management’s Remarks
Hilton’s management pointed to key segment and market dynamics that shaped the latest quarter’s outcome and influenced forward-looking guidance.
Group Travel Outperformed: Group bookings, particularly for company meetings and urban events, grew over 6% year-over-year, offsetting softness in leisure demand. Management reported that group business position is up mid-single digits, supporting near-term results despite some booking pace moderation.
Leisure Demand Softened: Leisure transient bookings saw a slowdown as the quarter advanced, mirroring heightened economic uncertainty. CEO Chris Nassetta cited travelers’ reluctance to commit, with short-term bookings flat year-over-year into Q2, indicating a 'wait-and-see' approach.
Robust Development Pipeline: Hilton opened 186 hotels in Q1 (over 20,000 rooms), achieving 7.2% net unit growth. International expansion was strong, with half of openings outside the U.S. and debuts in Greece, Africa, and Southeast Asia. The pipeline grew 7% YoY to over 503,000 rooms.
Conversions Drive Openings: Approximately 40% of new hotel additions were conversions, led by Doubletree and Spark brands. Management emphasized conversions become more attractive in uncertain environments, helping sustain momentum and reflecting owner desire for strong branding.
Non-RevPAR Fee Growth: Fees not tied directly to room revenue—such as credit card partnerships, purchasing, and HGV fees—outperformed internal expectations, contributing significantly to the non-GAAP profit beat. Jacobs indicated these streams would remain above algorithm for the year.
Drivers of Future Performance
Management’s outlook hinges on navigating macroeconomic uncertainty while leveraging Hilton’s growth model. Key drivers include expanding the development pipeline, which exceeds 500,000 rooms with nearly half under construction, and capitalizing on strong conversion activity, projected at 40% of openings this year. Stability in group bookings, expected to outperform transient, and resilient small-to-medium business travel are crucial, offsetting potential leisure softness. International growth remains a priority, focusing on Asia Pacific (especially Southeast Asia and India), Africa, and Latin America, where new brand entries and franchise agreements aim to boost fee revenue and diversify geographic presence. Continued growth in non-RevPAR fees from credit cards and other partnerships also supports the outlook, providing earnings stability independent of room demand fluctuations. Hilton aims for 6-7% net unit growth, reinforcing its asset-light expansion strategy.
Top Analyst Questions
Carlo Santarelli (Deutsche Bank): Asked about recession risks and Hilton’s preparedness. Nassetta emphasized the resilient asset-light model, strong balance sheet, high margins, and the company's readiness, drawing parallels to navigating past downturns effectively while gaining share.
Shaun Kelley (Bank of America): Questioned the impact of macro uncertainty and tariffs on development. Nassetta noted strong Q1 development metrics (signings, starts, openings) and highlighted conversions and projects already under construction provide near-term stability with minimal slowdown observed yet.
Stephen Grambling (Morgan Stanley): Sought details on potential responses if the economy weakens. Management stressed its seasoned team, ability to maintain efficiency, and history of outmaneuvering competitors during downturns to improve long-term positioning, citing post-COVID margin expansion.
David Katz (Jefferies): Inquired about the economics of development in China and APAC. CFO Kevin Jacobs explained fee-per-room growth is expected as deals shift to higher-fee franchise models (beyond initial JVs) with minimal capital investment required by Hilton.
Robin Farley (UBS): Asked for clarity on non-RevPAR fee growth drivers and sustainability. Jacobs confirmed these fees (credit card, purchasing, etc.) exceeded Q1 expectations, are forecast above algorithm for the year, and represent durable diversified income streams.
Catalysts in Upcoming Quarters
In the coming quarters, the StockStory team will closely monitor (1) trends in RevPAR across leisure, group, and business travel segments, especially as macroeconomic volatility persists; (2) the pace of new hotel openings and the proportion of conversions versus new builds, as these signal development momentum; and (3) the trajectory of non-RevPAR fee streams, which are critical for profit stability. We will also assess progress in international markets and any shifts in booking patterns or consumer sentiment.
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