Hilton Worldwide Forecasts Lower-than-Expected Full-Year Profit

While Hilton's adjusted per-share earnings of $1.68 surpassed estimates, total expenses surged by 13.8% to $2.2 billion in the fourth quarter.

Hilton Worldwide (HLT.N) projected a full-year profit below market expectations on Wednesday, signaling a normalization in travel demand after surpassing analysts’ predictions for fourth-quarter earnings.

While U.S. hotel operators initially thrived on pent-up leisure travel demand post-pandemic, Hilton attributed its recent success to increased licensed fees and the resurgence of group and convention travel.

Morningstar analyst Dan Wasiolek noted that a deceleration was expected following robust growth recovery in previous years, asserting that travel demand had normalized rather than weakened.

Hilton anticipates a modest 2% to 4% increase in full-year revenue per available room (RevPAR) in 2024, a significant decrease from the 12.6% surge seen in 2023.

Despite this forecast, the company’s shares rose by 1.2% in early afternoon trading.

Hilton, renowned for brands like Waldorf Astoria Hotels & Resorts, forecasted an adjusted profit for 2024 between $6.80 and $6.94 per share, falling short of analysts’ expectations of $7.07.

Sylvia Jablonski, chief investment officer of Defiance ETFs, observed that the market holds high expectations for outlooks and is selective in rewarding exceptional earnings.

In the fourth quarter, room revenue climbed by 5.7% year-over-year to $107.69, driven by increased occupancy in Asia Pacific and higher room rates in the Middle East and Africa.

Despite challenges from COVID-19 and geopolitical tensions, Hilton demonstrated resilience through its global presence and diverse brand portfolio.

Chief Financial Officer Kevin Jacobs attributed the company’s performance to better-than-expected fee growth, fueled by superior RevPAR performance and licensed fee growth.

However, leisure demand in the U.S. remained stagnant due to challenging year-over-year comparisons.

While Hilton’s adjusted per-share earnings of $1.68 surpassed estimates, total expenses surged by 13.8% to $2.2 billion in the fourth quarter.

Revenue of $2.60 billion aligned closely with estimates. Looking ahead, Hilton projected a net unit growth between 5.5% and 6.0% for 2024.

The upcoming earnings report from rival Marriott International (MAR.O) will provide further insights into the state of the hospitality industry.