The hotel heavyweight expects its all-important group business to recover fully within a year. If Hilton decides to book one of its ballrooms to celebrate, it’ll find higher rates than in 2019.
the hilton hotel empire looks forward to once again welcoming business meetings and weddings to its ballrooms, meeting spaces and guest rooms from around the world. Its executives predicted on Tuesday that it expects its group bookings to ramp up this year and return to pre-pandemic levels within about 12 months.
“Our sales people can hardly keep up with all the leads that are coming in for the second half of this year and especially for next year,” Chairman and CEO Christopher Nassetta said on a conference call.
“I think 2023 [group booking levels] will be back to 2019 levels,” Nassetta said.
The Virginia-based hotel operator has historically seen about 20% of its bookings related to group travel. By the third quarter, group bookings had rebounded to 16% of its mix. This is a marked improvement from groups that made up just 10% of the mix at the height of the pandemic.
Most events are scheduled later in the year because it takes time for planners to organize them. Group revenue recorded in the first quarter for all future periods was down just 4% from 2019 levels.
“Social events and smaller events continue to lead the recovery, while demand for corporate meetings and conventions improved significantly throughout the quarter,” Nassetta said.
As reservations increase, Hilton gains power over room prices. In March, the group’s total revenue per available room, a key industry metric, was “more than 75% of 2019 levels, improving about 25 points from January,” executives said.
Hilton charged rates for corporate meetings 13% above 2019 levels. For new group bookings for gatherings later this year, Hilton’s rates are in the “high numbers compared to 2019 “.
Looking at room rates in the group, leisure and business segments, Hilton said rates were 3% higher in the first quarter than a year earlier.
Executives expect April revenue per available room to be just five percentage points below 2019 levels. A full recovery in room rates is likely soon.
More broadly, business travel is in recovery mode. In March, business travel specifically to the United States was just 9% behind 2019 figures.
Hilton announces an increase in profits
During the quarter ended March 31, Hilton generated $211 in net profit, a measure of profit, on $1.72 billion in revenue. The company turned a profit – after suffering a loss of $108 million in the same period a year ago. Revenue increased 96% year over year.
The company added 13,200 rooms in the first quarter, representing net unit growth of 5%, year-over-year. Looking to the future, it plans to add around 410,000 rooms over time.
This development pipeline is important because it costs Hilton little to add properties compared to the net margins that new units bring.
“Hilton is indeed in normal times a free cash flow machine, especially given the almost pure 100% profit resulting from the addition of an additional franchise hotel in some of its larger brands – in fact, few extra costs for the newer Hampton Inn business, for example.” wrote analysts at Trust Securities in a recent report.