The operator welcomes participants to the Hilton First Quarter 2024 Earnings Conference Call and introduces Jill Chapman, who reminds listeners of the forward-looking statements and non-GAAP financial measures that will be discussed. Chris Nassetta, President and CEO, will provide an overview of the current operating environment and the company's outlook, followed by Kevin Jacobs, CFO and President of Global Development, who will review first quarter results and discuss expectations for the year. The call will end with a Q&A session.

In the second quarter, the company's adjusted EBITDA and adjusted EPS exceeded expectations, despite RevPAR growth being at the low end of the projected range. The company announced new partnerships and brand additions, which will help drive loyalty and growth. RevPAR increased by 2%, with leisure and business transient segments performing well. The company expects continued RevPAR growth for the rest of the year, with group performance expected to be strong. In terms of development, the company opened over 100 hotels and achieved net unit growth of 5.6%, with a significant portion coming from conversions to DoubleTree and Spark brands.

In the quarter, Hilton celebrated the addition of new luxury and lifestyle properties, reached milestones such as opening their 800th hotel in Asia-Pacific and their 225th in the CALA region, and opened their 3,000th Hampton property worldwide. They also signed agreements for 30,000 rooms, increasing their pipeline to a record 472,000 rooms. Construction starts were up 45% compared to last year and Hilton continues to have the most rooms under construction in the industry.

Hilton has announced partnerships and acquisitions to expand into the lifestyle and experiences categories. This includes acquiring a controlling interest in Sydell Group to expand the Nomad brand, and an agreement with AJ Capital to acquire the Graduate Hotels brand. They also announced a partnership with AutoCamp to offer guests a unique outdoor adventure experience at select locations in the United States. Hilton Honors members will be able to earn and redeem points and enjoy exclusive benefits at these properties.

The company has announced partnerships with small luxury hotels and is focused on accelerating growth and enhancing customer offerings. They expect a net unit growth of 6-6.5% and are leveraging technology for personalized experiences. The company has been recognized for its workplace culture and has received numerous awards. The company is pleased with their first quarter results and expects continued growth. The call will now be turned over to Kevin for more details on the results and expectations for the full year.

The company saw a 2% growth in system-wide RevPAR during the quarter, driven by strong international performance and group recovery. Adjusted EBITDA was up 17% year-over-year, exceeding expectations due to better-than-expected fee growth. U.S. RevPAR was down slightly due to renovations and weather impacts, but group performance remained strong. RevPAR in Europe, the Middle East and Africa, and Asia-Pacific all saw significant growth, driven by various events and strong demand. Development also saw positive results.

The article discusses the performance of a hotel company in the first quarter, highlighting their increase in pipeline rooms and their expectations for net unit growth and RevPAR growth in the future. They also mention their plans for capital return and provide details on their first quarter results. The speaker then opens the floor for questions.

Chris Nassetta, CEO of a hotel company, addresses a question about the company's performance in the first quarter and outlook for the rest of the year. He explains that the first quarter's lower RevPAR (revenue per available room) can be attributed to more properties under construction and unexpected weather and holiday shifts. However, he remains optimistic about the rest of the year, as the broader economy is strong and corporate profits are still good.

The hotel group business remains strong, with high demand and positive outlook for business travel. While leisure travel is normalizing, there is still expected to be modest growth due to pricing power. The company maintains its guidance for the year and has momentum in development, with higher than expected signings, starts, and openings. The company expects to reach 6-7% in NUG and has a positive outlook for the year.

The speaker discusses the company's positive outlook for the year, citing an increase in deals and hotel construction. They attribute this growth to the strength of the economy and the profitability of their existing portfolio. The speaker also mentions that all three major segments are expected to see growth in RevPAR, with the lower-end chain scale segments experiencing modest growth.

In the first quarter, the company experienced a negative impact due to various factors. However, their performance was better compared to the industry as a whole, driven by select service brands. The first quarter of this year also had difficult comparisons to last year, but the company expects it to improve in the second half of the year. Group and business transient demand and occupancy are still below 2019 levels, but revenue is higher. There is some concern about the prolonged decrease in occupancy and its potential impact on rate and RevPAR in the future.

The speaker discusses the current state of the hotel industry, specifically in regards to group and business transient demand. They predict that by the end of the year, group demand will be back to normal levels, and business transient demand will also improve due to strong balance sheets and earnings for big corporate customers. The first quarter is expected to be messy, but group trends are strong and provide a good platform for yield management. Overall, occupancies are expected to gradually increase throughout the year.

The speaker provides additional information about the regions mentioned in the previous paragraph. They note that the U.S. is expected to see modest occupancy gains, primarily in business and group travel rather than leisure. They also mention that Europe and Japan are showing strength, while China's performance was flat in the quarter. They expect the U.S. to be at the lower end of their 2-4% growth range, but the rest of the world is performing well.

The speaker predicts that the demand for travel in China will remain stable for the year due to domestic travel and strong performance in urban markets. However, the secondary and tertiary markets are experiencing a decline due to people leaving the country. To see growth, there needs to be an increase in inbound travel from other parts of Asia Pacific and the world. The speaker also mentions that there will be more flights from major destinations into China in the second and third quarter, which will help boost travel. Additionally, the Chinese customer base is currently staying within Asia, but this is expected to change as more flights open up.

The speaker, Kevin Jacobs, discusses the increase in base and other fees for the company, which has been driven by a mix of factors including international growth, strong performance in license fees, and the success of their purchasing business. In response to a question about net unit growth, Chris Nassetta explains that the recent acquisitions of SLH and Graduate will be incorporated into their growth projections, but the impact will not be included until the deals are closed.

The company expects the SLH to be integrated into their system over the next few years, with a high percentage of existing SLH members signing up to join. The technology is being worked on and should be completed by the middle or late summer, allowing customers to book through their channels and earn rewards. The expected growth rate of 6-7% includes a one-time contribution from the Graduate acquisition, and the company does not anticipate any further additions to their portfolio in the near future. The guidance for growth is primarily organic.

The speaker, Smedes Rose, asks about the increase in the percentage of the pipeline under construction and whether it is mainly in the U.S. or not. Kevin Jacobs responds that it is from both the U.S. and conversions, and that labor and raw material costs have leveled off. He also mentions that capital remains expensive, but the better projects are still getting financed and the company is taking share. They expect their starts to surpass previous peaks this year.

The speaker discusses the challenges of financing and mentions that they are making enough progress to keep momentum. The next question is from a person named Brandt Montour who asks about timing items and when they can expect them to reverse. Kevin Jacobs responds, stating that the timing items will mostly reverse in the second quarter and that they increased their guidance by $45 million but will also face a headwind of $10-15 million in FX. The next question is from Chad Beynon who asks about group bookings beyond 2024 and the speaker responds that they are seeing high single-digit to low double-digit increases for 2025 and 2026. The final question is from Patrick Scholes, but it is not mentioned what the question is about.

The speaker discusses their plans for the NoMad brand, which they recently acquired a controlling interest in. They believe it is a strong brand and will compete effectively with other luxury lifestyle brands. They plan to expand the brand to around 100 hotels through conversions and new builds. They also mention that they did a lot of research and believe that the NoMad brand aligns with modern luxury lifestyle trends. Acquiring the brand was an efficient way for them to enter the space and accelerate their growth.

The company's recent acquisition of a luxury lifestyle brand was seen as a smart move, as it aligned with their goals and was obtained at a reasonable price. The company expects to see organic growth in the future. A question was asked about the seasonality of fee rate growth, and the company responded that there may be some fluctuations, but overall the first quarter showed strong improvement in fees as a percentage of room revenue. This improvement is expected to continue throughout the year.

During the quarter, the Honors occupancy was at a historical high of 64%, showing that the loyalty program is working well. The company is exploring partnerships in the experiential travel industry, such as with SLH and AutoCamp, to offer additional options for customers to engage with the brand. These partnerships are not in conflict with the company's core business and are expected to further increase customer engagement.

During an investor call, the speaker discussed their aspirations to increase occupancy in their Honors program to 75% or higher. This will involve implementing various strategies and creating a more customized offering in certain regions, particularly in Asia. They expect to see continued growth in Honors occupancy, which is their lowest cost distribution channel. The speaker did not provide specific details on their strategies for competitive reasons. In a separate question, they were asked about potential impact from weaker demand in lower chain scales and the upcoming Olympics in the third quarter.

The speaker believes that the Olympics will have a positive impact on Europe and specifically on France, but it will not significantly affect their portfolio. They then address a question about their outlook and state that it is based on a strong consensus view that the economy will continue to grow at a decent rate and employment will remain strong. They mention the Fed's efforts to orchestrate a soft landing and their belief that the economy will soften as the year goes on. They have factored all of this into their guidance.

The company's core customers have a high median income, which is a positive sign for their financial stability. The economy is expected to have a soft landing and positive growth. In the quarter, U.S. occupancy is still below pre-COVID levels, but this is mainly due to seasonality and a holiday shift. The company is optimistic that occupancy will continue to improve.

The speaker, Kevin Jacobs, discusses the competition for conversions in the hotel industry, stating that it varies depending on the specific deal and availability of brands in the market. He also mentions that the company has been successful in various regions and with different brands, including Spark, DoubleTree, and their soft brands.

The good news is that the company's flags are highly sought after by developers, and they are consistently at the top of the list due to the quality of their brands. The next question is about the demand in Europe, which is strong across the board for both business and leisure travelers. The company had a good flow-through of revenue to EBITDA in the first quarter, despite some calendar headwinds, and they expect it to continue in line with their projections.

The speaker reiterates that fees are the highest margin business and that an increase in fees will result in better flow-through and margin growth. They express confidence in the business and the momentum in the economy, and look forward to discussing the results after Q2. The conference call has now ended.

This summary was generated with AI and may contain some inaccuracies.