HLT 4Q 2013 CONF CALL NOTES

Takeaway: NOT YOUR FATHER'S HILTON:

Not your Father's Hilton - A really solid quarter operationally. Don't fret about guidance, Q1 should be another beat.

 

 

CONF CALL

  • HLT: Global leading RevPAR industry premium at 15%
  • #1 in pipeline, rooms under construction worldwide
  • Further migration to capital-light model; will consider divest RE in the future
  • Timeshare:  54% of interval (3rd-party); 78% of year-end inventory was capital-light
  • 2013 Systemwide RevPAR 5.2% with 3.3% in ADR and 1.3% occupancy gains
  • Transient growth outpaced group but group picked up in latter part of 2013
  • Group particularly strong in big-box hotels (+10%)
  • RevPAR industry premium grew 1% in 2013 
  • 60% pipeline outside of US
  • ME pipeline- largest in industry with 20k rooms
  • Rooms under construction: 25% higher than nearest competitor
  • Have not lost focus on growth in US
  • Net unit growth to accelerate in 2014/2015
  • DoubleTree:  fastest upscale brand in lodging; doubled in size since 2007
  • China:  +6.7% REVPAR in 2013
  • Asia/Pac: 55k rooms in pipeline
  • Waldorf-Astoria Beijing opened last week
  • Luxury: Conrad/Waldorf-Astoria:  doubled since 2007, 27 properties in pipeline
  • Hilton brand:  554 hotels opened; 150 projects in pipeline (95% non-US)
  • Home2Suites: opened 28 hotels and 100 in pipeline
  • Hilton Garden Inn: 214 in pipeline with 16 hotels in China 
  • Mobile:  8x increase in revenues; doubled in last few months
  • 2014:  
    • Rate up meaningfully; group business (8 big-box hotels) up 10%; medium-sized group business up 7%
    • Modest growth in US but better than 2013
    • Outlook for Japan is very strong 
    • China 5.5%-6.5% REVPAR in 2014, down from 7% from 2013
    • London will be stronger in 2014 due to stronger group revenue, trending +20% in 2014.
    • ME&A:  continue to be strong
    • Egypt remains highly volatile
  • Growth rate in Q4 slower than previous quarters due to decreasing govt business resulting from govt shutdown
  • San Fran/Hawaii:  +13%, +12% RevPAR
  • NYC:  +3.5% RevPAR;  owned hotels:  +4% RevPAR
  • EUROPE:  +3.9% RevPAR driven by occu (Germany, Austria, .....)
  • Asia-Japan:  +7% RevPAR
  • Hilton Waikiki new timeshare development: sales begin in 2014; construction will begin in 2016
  • Fixed/floating debt:  50%/50%
  • Term loan at end of 2013:  $6b
  • Weighted debt: 4.2%; 6.2 yrs maturity
  • UK-bad weather would impact fees in Q1
  • Share-based comp $25m benefit reversal from accrual

Q & A

  • $700-$900m 2014 cash balance for debt reduction
  • Debt repayment of $700-$900m result in coverage of 4.5x 
  • China:  GDP moderating; still generally pretty positive; higher-end hotel development has slowed, mid-scale development has picked up; the upcoming market will be more mid-scale (3.5-4 star space)
  • 2014 occupancy expectations:  73% in 2013, 0.5%-1.0% occupancy growth in 2014
  • Big group hotels still have more room for occupancy growth
  • Changing a big contract in Mecca which resulted in volatile incentive fees
  • 2014: IMF growth- 8-10% range; should ramp up to 20% in the future
  • Supply trends/growth: 
    • seeing little full-service, zero luxury, all limited service in suburbia 
    • Rooms supply growth 1.5% in 2014 vs 2%-2.5% long-term trend
  • New Brands: 
    • looking to develop as well as add brand extensions.. 
    • will do then announce and market
    • definitely developing boutique but will be different than peers
  • RevPAR 5-7% variables:
    • higher end: continued strength of transient at or better than 13
    • need group to show up
    • nothing big to go wrong in the World
  • Waldorf redevelopment: recently spent $125m but not yet rooms because considering all alternatives to maximize value to shareholders - including some sort of conversion.  Will layout plan for future of Waldorf Astoria later this year.  

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