Hilton Forecasts Full Rebound in Group and Event Bookings Within a Year

The Hilton hotel empire is eager to welcome back business gatherings and weddings at its ballrooms, meeting spaces, and guestrooms worldwide. Its executives forecast on Tuesday that it expects its group bookings to speed up this year and return to pre-pandemic levels within about 12 months.

"Our sales folks can hardly keep up with all the leads that are coming in for the second half of this year and particularly into next year," said president and CEO Christopher Nassetta during an earnings call.

"I do think 2023 [group booking levels] will be back at 2019 levels," Nassetta said.

The Virginia-based hotel operator has historically seen about 20 percent of its bookings tied to group travel. In the third quarter, group bookings had rebounded to 16 percent of its mix. That was a sharp improvement from groups accounting for only 10 percent of the mix during the worst of the pandemic.

Most events are scheduled for later in the year because it takes time for planners to put them together. Group revenue booked in the first quarter for all future periods was down just 4 percent relative to 2019 levels.

"Social and smaller events continue to lead recovery, while demand for company meetings and conventions improved meaningfully throughout the quarter," Nassetta said.

As bookings rise, Hilton gains pricing power on room rates. In March, total group revenue per available room, a key industry metric, was "more than 75 percent of 2019 levels, improving approximately 25 points versus January," executives said.

Hilton has been charging rates for company meetings at 13 percent above the 2019 level. For new group bookings for gatherings later this year, Hilton's rates are in the "high single digits versus 2019."

Looking at room rates across the group, leisure, and business segments, Hilton said rates were 3 percent higher in the first quarter than a year earlier.

Executives forecast that April revenue per available room would be only five percentage points shy of 2019's level. A full recovery of room rates is likely soon.

More broadly, business travel is in recovery mode. In March, business travel specifically in the U.S. was only 9 percent lagging behind 2019's figures.

Hilton Reports a Profit Upswing

In the quarter ended March 31, Hilton generated $211 million in net income, a measure of profit, on $1.72 billion in revenue. The company swung to profit — having suffered a loss of $108 million in the same period a year ago. Revenues were up 96 percent, year-over-year.

The company added 13,200 rooms during the first quarter, or 5 percent net unit growth, year-over-year. Glancing ahead, it expects to add about 410,000 rooms over time.

That development pipeline is important because it costs little for Hilton to add properties relative to the net margins new units bring.

"Hilton is is indeed in normal times a free cash flow machine, especially given the nearly pure 100 percent profit from adding an additional franchised hotel in some of its largest brands — effectively little additional corporate cost for the newest Hampton Inn, for example," wrote analysts at Truist Securities in a recent report.