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.
