December 5, 2022

Springswines

The Tour And Travel Enthusiasts

Hilton’s business travel bookings led by small and medium companies

3 min read
Hilton’s business travel bookings led by small and medium companies

Hilton is reporting profit of $240 million in the third
quarter of 2021, driven by high demand and near or above 2019-level rates for
both leisure travel and bookings from small and medium enterprises (SMEs). 

Systemwide, Hilton reports rates in Q3 were just 2.5% below
the same period in 2019. In a call with analysts to share the results, CEO
Chris Nassetta says leisure rates exceeded 2019 levels in the quarter, leisure
room nights were “roughly in line” with 2019 levels and business transient room
nights were about 75% of “prior peak levels.” 

Systemwide comparable RevPAR was down nearly 19% compared to
the same period in 2019 but improved 17 percentage points compared to the
second quarter of this year. And now in the fourth quarter, Nassetta says about
40% of Hilton’s hotels have exceeded 2019 RevPAR levels this month to date, and
bookings for all future periods are just 8% below 2019 levels.

Adjusted EBITDA was $519 million in the third quarter of
this year, up 132% year-over-year and down 14% compared to Q3 of 2019.

Nassetta says Hilton had been working to increase its focus
on the SME segment of business travel and that effort is continuing.

“Even though business transient has lagged for the quarter –
75% – it’s sort of a tale of two cities. You have the big corporates, which are
40% off, but then you have small and medium, which are only maybe 5 to 10%
off … and they are less price sensitive.”

“That’s why we were working so hard on accessing more of
that demand base pre-COVID, and it has helped us during COVID.”

In the leisure segment, Nassetta describes demand as “off
the charts,” at 85 to 90% occupancy in the United States on weekends, boosting
rates above 2019 levels. 

“I do think that leisure pricing power will continue because
I believe leisure demand will remain at elevated levels,” he says. 

When asked about distribution strategies and relationships
with online travel agencies, Nassetta says: “We believe there’s an efficient
frontier, and we’ve calculated it as best we can by individual market,
property, based on what they can deliver at that price point versus what we can
deliver. How do we deliver the highest revenue for the lowest distribution cost?
And we do believe – that’s why we’ve had a good relationship with the OTAs –
that they play a part in that.”

Nassetta says the OTAs have traditionally accounted for
about 10 to 12% of bookings, and he expects their share to remain around that
level. 

“I think when we wake up in a couple of years it will look
an awful lot like it did before, and we obviously feel good about the contractual
terms we have with the OTAs and our ability to have attractive terms going
forward.”

As of the end of Q3, Hilton has more than 2,620 hotels with
404,000 rooms in its development pipeline in 114 countries and territories, including
27 countries and territories where the company does not currently have any
existing hotels.

“We are obviously quite pleased, given what we’ve all lived through
in the last 20 months, to be able to report the progress that we’re able to
report for the third quarter. I remain quite optimistic about where this
recovery is going and what the opportunities are in this industry but particularly
for our business and the growth of our business.”