Hilton Worldwide : Q4 2021 Transcript

Published: 2022-02-17 14:48:15 ET HLT

Corrected Transcript

16-Feb-2022

Hilton Worldwide Holdings, Inc. (HLT)

Q4 2021 Earnings Call

Total Pages: 20

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Hilton Worldwide Holdings, Inc. (HLT)

Corrected Transcript

Q4 2021 Earnings Call

16-Feb-2022

CORPORATE PARTICIPANTS

Jill Slattery

Kevin J. Jacobs

Senior Vice President-Investor Relations and Corporate Development,

Chief Financial Officer & President, Global Development, Hilton

Hilton Worldwide Holdings, Inc.

Worldwide Holdings, Inc.

Christopher J. Nassetta

President, Chief Executive Officer & Director, Hilton Worldwide

Holdings, Inc.

.....................................................................................................................................................................................................................................................................

OTHER PARTICIPANTS

Shaun C. Kelley

Rich Allen Hightower

Analyst, BofA Securities, Inc.

Analyst, Evercore Group LLC

Joseph Greff

Richard J. Clarke

Analyst, JPMorgan Securities LLC

Analyst, AB Bernstein

Thomas G. Allen

David Katz

Analyst, Morgan Stanley & Co. LLC

Analyst, Jefferies LLC

Smedes Rose

Robin M. Farley

Analyst, Citigroup Global Markets, Inc.

Analyst, UBS Securities LLC

Stephen Grambling

Chad Beynon

Analyst, Goldman Sachs & Co. LLC

Analyst, Macquarie Capital (USA), Inc.

Patrick Scholes

Analyst, Truist Securities, Inc.

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Hilton Worldwide Holdings, Inc. (HLT)

Corrected Transcript

Q4 2021 Earnings Call

16-Feb-2022

MANAGEMENT DISCUSSION SECTION

Operator: Good morning, and welcome to the Hilton Fourth Quarter 2021 Earnings Conference Call. All participants will be in a listen-only mode. [Operator Instructions] Please note, this event is being recorded.

I would now like to turn the conference over to Jill Slattery, Senior Vice President, Investor Relations and Corporate Development. You may begin.

Jill Slattery

Senior Vice President-Investor Relations and Corporate Development, Hilton Worldwide Holdings, Inc.

Thank you, Chad. Welcome to Hilton's fourth quarter and full year 2021 earnings call. Before we begin, we would like to remind you that our discussions this morning will include forward-looking statements. Actual results could differ materially from those indicated in forward-looking statements, and forward-looking statements made today speak only to expectations as of today. We undertake no obligation to update or revise these statements.

For a discussion of some of the factors that could cause actual results to differ, please see the Risk Factors section of our most recently filed Form 10-K. In addition, we will refer to certain non-GAAP financial measures on this call. You can find reconciliations of non-GAAP to GAAP financial measures discussed in today's call in our earnings press release and on our website at ir.hilton.com.

This morning, Chris Nassetta, our President and Chief Executive Officer, will provide an overview of the current operating environment. Kevin Jacobs, our Chief Financial Officer and President, Global Development, will then review our fourth quarter and full year results. Following their remarks, we will be happy to take your questions.

With that, I'm pleased to turn the call over to Chris.

Christopher J. Nassetta

President, Chief Executive Officer & Director, Hilton Worldwide Holdings, Inc.

Thank you, Jill. Good morning, everyone, and thanks for joining us today. As our results show, we made significant progress in our recovery throughout 2021. We saw a meaningful increase in demand for travel and tourism, and our team members around the world were there to welcome guests with our signature hospitality as they look to reconnect and create new memories.

We continued to demonstrate our resiliency by remaining laser-focused on providing reliable and friendly service to our guest and by launching several new industry-leading offerings to provide them even more choice and control.

We also continued to expand our global footprint adding even more exciting destinations to our portfolio and achieving a record year of room openings. All of this, together with our resilient business model, translated into solid results.

For the full year, we grew RevPAR 60% and adjusted EBITDA 93%. Both RevPAR and adjusted EBITDA were approximately 30% below 2019 peak levels. More importantly, our margins were 500 basis points above 2019 peak levels, reaching roughly 66% for the full year.

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Hilton Worldwide Holdings, Inc. (HLT)

Corrected Transcript

Q4 2021 Earnings Call

16-Feb-2022

While some costs will come back in as we continue to recover, we remain extremely focused on cost discipline. Given our asset-light business model and the actions we took during the pandemic to further streamline our operations, we expect permanent margin improvement versus prior peak levels in the range of 400 basis points to 600 basis points over the next few years.

Turning to results for the quarter. RevPAR increased 104% year-over-year and adjusted EBITDA was up 151%. RevPAR was roughly 87% of 2019 levels with ADR nearly back to prior peaks. Compared to 2019, occupancy improved versus the third quarter with higher demand across all segments.

Strong leisure over the holiday season drove US RevPAR to more than 98% of 2019 levels for December. Business travel also improved sequentially versus the third quarter, with solid demand in October and November before the Omicron variant weighed on recovery in December.

For the quarter, business transient room nights were approximately 80% of 2019 levels. Group RevPAR improved 11 percentage points over the third quarter to roughly 70% of 2019 levels. Performance was largely driven by strong social business, while recovery in company meetings and larger groups continued to lag.

As we kicked off the New Year, seasonally softer leisure demand, coupled with incremental COVID impacts due to the Omicron variant, tempered the positive momentum we saw through much of the fourth quarter. For January, system-wide RevPAR was approximately 75% of 2019 levels.

Despite some near-term choppiness, we remain optimistic about accelerated recovery across all segments throughout 2022. We anticipate strong leisure trends to continue again this year, driven by pent-up demand and nearly $2.5 trillion of excess consumer savings. Our revenue position for President's weekend is 7 percentage points ahead of 2019 levels. And our position for weekends generally is up significantly for the year, both indicating continued strength in leisure travel.

Similarly, we expect growth in GDP and nonresidential fixed investment, coupled with more flexible travel policies across large corporate customers to fuel increasing business transient trends. As a positive indication of business transient recovery, at the beginning of January, midweek US transient bookings for all future periods were down 13% from 2019 levels and improved to just down 4% by the end of the month. Additionally, STR projects US business transient demand will return to 92% of pre-pandemic levels in 2022.

On the group side, our position for the year is to remain steady as Omicron-related disruption was largely contained to the first quarter of 2022 with most events rescheduled for later in the year. We continue to expect meaningful acceleration in group business in the back half of the year as underlying group demand remains strong. Compared to 2019, our tentative booking revenue was up more than 25%. Additionally, meeting planners are increasingly more optimistic with forward bookings trending up week over week since early January.

Overall, we remain very confident in the broader recovery and our ability to keep driving value on top of that. This should allow us to generate strong free cash flow growth and our expectation is to reinstate our quarterly dividend and begin buying back stock in the second quarter.

Turning to development. We opened more than a hotel a day in 2021, totaling 414 properties and a record 67,000 rooms. Conversions represented roughly 20% of openings. We achieved net unit growth of 5.6% for the year, above the high end of our guidance, and added approximately 55,000 net rooms globally, exceeding all major branded competitors. Our outperformance reflects the power of our commercial engines, the strength of our brands and our disciplined and diversified growth strategy.

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Hilton Worldwide Holdings, Inc. (HLT)

Corrected Transcript

Q4 2021 Earnings Call

16-Feb-2022

Fourth quarter openings totaled more than 16,000 rooms, driven largely by the Americas and Asia Pacific regions. In the quarter, we celebrated the opening of our 400th hotel in China and our first Home2 Suites in the country. This positive momentum continued into the new year with the highly anticipated opening of the Conrad Shanghai just last month, marking the brand's debut in one of the world's busiest and most exciting markets.

During the quarter, we also continued the expansion of our luxury and resort portfolios with the opening of the Conrad Tulum and the new all-inclusive Hilton Cancun. With more than 400 luxury and resort hotels around the world and hundreds more in the pipeline, we remain focused on growing in these very important categories.

We were also thrilled to welcome guests to the Motto New York City Chelsea, a major milestone for this quickly growing brand and a perfect addition to Hilton's expanding lifestyle category. This hotel exemplifies what it means to be a lifestyle property. It incorporates unique and modern design elements and provides guests with authentic and locally-minded experiences.

We also celebrated the first lifestyle property in Chicago with the opening of the Canopy Chicago Central Loop and debuted the brand in the UK with the opening of the Canopy London City. These spectacular properties joined recently opened Canopy hotels in Paris, Madrid and São Paulo.

In 2021, we grew our Canopy portfolio by more than a third year-over-year, opening hotels across all major regions. We ended the year with 408,000 rooms in our development pipeline, up 3% year-over-year, even after a record year of openings. Our pipeline represents an industry-leading 38% of our existing supply, giving us confidence in our ability to deliver mid single-digit net unit growth for the next couple of years and eventually return to our prior 6% to 7% growth range. For this year, we expect net unit growth to be approximately 5%.

As our guests' travel needs continue to evolve, we again introduced innovative ways to enhance the guest experience. In the quarter, we announced the launch of Digital Key Share, which allows more than one guest to have access to their room's digital key via the Hilton Honors app.

To further reward our most loyal Hilton Honors members, we introduced automated complementary room upgrades, notifying eligible members of upgrades 72 hours prior to arrival. With our guests at the heart of everything we do, we've been thrilled to hear that the early feedback for both industry-leading features has been overwhelmingly positive.

In the quarter, Hilton Honors membership grew 13% year-over-year to more than 128 million members. Honors members accounted for 61% of occupancy in the quarter, just a few points below 2019 levels, and engagement continued to increase across members of all tiers.

We work hard to ensure that our hospitality continues to have a positive impact on the communities we serve. For that reason, we're incredibly proud to be recognized for our global leadership in sustainability. For the fifth consecutive year, we were included on both the World and North America Dow Jones Sustainability Indices, the most prestigious ranking for corporate sustainability performance.

Overall, I'm extremely pleased with the progress we've made over the last year, and I'm very confident that Hilton is better positioned than ever to lead the industry as we enter a new era of travel.

With that, I'll turn the call over to Kevin to give you more details on the quarter.

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Hilton Worldwide Holdings Inc. published this content on 16 February 2022 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 17 February 2022 19:47:08 UTC.