Hilton Plans up to 3 New Brands Despite Trimming Growth Forecast

Hilton forecasted “modest” growth this year because of economic uncertainty, yet still planned to pursue the development of as many as three new brands.

“We believe travelers are in a wait-and-see mode as the rapidly changing macro environment continues to unfold,” said Christopher Nassetta, president and CEO on a Tuesday earnings call, citing “somewhat weaker” demand.

“Broader macro uncertainty intensified in March, which pressured demand, particularly across leisure,” Nassetta said. “Weaker trends have continued into the second quarter,” he said. “We’re still seeing growth. Just a little less growth than what we would have expected coming into the year.”

Nassetta said the uncertainty wasn’t going delay the company’s plans to expand its portfolio of brands. “We’ve got 24 brands,” Nassetta said. “My guess is that, in the next year or two, we’re going to have 27.”

Despite the weakness, Nassetta painted a more optimistic picture than other CEOs, noting the potential for favorable economic policy – tax cuts and deregulation – later this year.

Hilton’s 2025 Outlook

The hotel operator on Tuesday trimmed its outlook for the full year. Hilton projected revenue per available room (RevPAR) will fall somewhere between 0% and an increase of 2% year-over-year, down from an earlier forecast of between 2% and 3%.

Hilton’s move was a rare departure from the industry’s traditional pattern of beating and raising outlooks, said analysts at Bernstein Research in a flash report.

Hilton expects its second-quarter RevPAR to be “roughly flat” compared to the same period last year. The Easter calendar shift from March to April bears some blame for the quarterly performance, but the softness suggests the slowdown wasn’t merely seasonal.

First-Quarter Trends

Revenue per available room (RevPAR) grew a modest 2.5% year-over-year driven by both strengthening rates and improving occupancy.

The company’s hotel rooms are staying fairly full. Global occupancy reached 67%, edging closer to pre-pandemic levels.

Hilton’s strongest performing region in the world in the first quarter was the Middle East & Africa, with RevPAR growth at 8.5% year-over-year. The U.S. market posted growth of 2.1%, while Asia Pacific RevPAR remained flat year-over-year.

Luxury brands did particuarly well. Waldorf Astoria Hotels & Resorts posted RevPAR growth of 10.7% and Canopy by Hilton saw a 7% increase.

Yet brands aimed at middle-class travelers limped along, with its flagship Hampton Inn brand seeing just 0.7% year-over-year growth in RevPAR, noted Bernstein analysts.

“We have seen a bit of a pullback in demand across all categories of leisure both at the high end and in the middle,” Nassetta said.

“Short-term group bookings … they’re sort of flat year-over-year, which is not bad, but if you look further out, they’re a little bit down,” the CEO said.

However, business transient and corporate travel remained resilient.

Nassetta said that travelers on the road for small- and medium-sized businesses made up roughly 85% of Hilton’s business transient mix, and that the business transient segment saw RevPAR rise by 2% in the quarter.

Sustained business travel bookings enabled the company to beat its adjusted EBITDA guidance. Adjusted EBITDA was $795 million in the first quarter, up 6% year-over-year.

New Brands?

Nassetta said Hilton was working on “two or three” new brands “organically,” or built internally instead of acquired.

One new brand would be a “soft brand,” where independent hotels could affiliate with Hilton and benefit from its distribution without having to adopt particular brand standards or change their operations much.

Nassetta said the company was considering a collection of lifestyle, or design-forward hotels with significant food and beverage offerings, would be under its Tapestry label.

“We want to add unique hotels that we think would be very additive to the system from a customer point of view and [satisfy] real demand in the owner marketplace,” Nassetta said.

He also teased a new “hard brand” that would sit, in terms of amenities and pricing, in-between its Motto and Canopy brands.

“Again, we see a big segment of demand that we’re not really serving and an owner community that is looking to do, around the world, a lot more of that,” the CEO said.

Last year, Hilton broke a 16-year spell of mergers and acquisitions, scooping up the Graduate Hotels and NoMad brands.

Nassetta hinted that it might create a brand in the “furnished apartment space,” too.

Acquistions Unlikely

The CEO hinted in roundabout comments that it was unlikely that the company would do more acquisitions this year, as last year had “spectacular” opportunities that rarely come about.

Nassetta didn’t refer by name to Marriott’s announcement on Monday that it would acquire the lifestyle hotel brand CitizenM. But he did make this remark:

“We look at, as we always have, everything,” he said. “Everything you read about that anybody is doing, you should assume we’ve looked at it and that given our size and scale and all of these things, for the most part, are broadly marketed, that we have chosen not to pursue it.”

“We look at everything, and I always have to say, ‘Never say never,’ but we have made, I think, great progress over 20 years of doing it the old-fashioned way,” Nassetta said. “We are much more focused on organic growth.”

Inbound U.S. Bookings

U.S.-based Hilton is shrugging off cross-border travel concerns. Nassetta reported no material impact from recent diplomatic tensions on overall bookings.

International inbound travel accounted for just 4% of Hilton’s total business and actually grew by a “mid-single digit” percentage in the quarter.

“What you saw was a progression where it was up a lot in January, a little bit less in February, and it was sort of flat in March,” Nassetta explained on the earnings call.

Canadian and Mexican visitors declined by “high single digit percentages. But this weakness was counterbalanced by increased traffic from Asian markets, the UK, and other European countries, some of whom may have found the U.S. more attractive to visit because of a weakened currency.

The trajectory suggests potential vulnerability if diplomatic tensions escalate further. For now, though, Hilton’s geographic diversification acts as an effective hedge against localized travel disruptions.

The comments defied the broader industry narrative that U.S. travel demand is weakening more rapidly than overseas markets.

Executives said that the trade dispute with Canada, which has led some Canadians to talk of boycotting U.S. brands, hadn’t impacted the company yet.

Hilton’s development teams in Canada said “they didn’t sense any sort of resentment or sentiment vis-a-vis our brands as a U.S.-based company that was affecting the sort of the trajectory of our development opportunities in the market at the moment,” according to Nassetta.

“Mexico and Canada combined are about 1.5% of our total revenue,” said Kevin Jacobs, chief financial officer.

“It’s not to say if you are part of our system and you own a hotel in Detroit or Buffalo … that you’re not feeling it,” Jacobs added. “I don’t mean to be flippant.”

Development Outlook Stays Bright

Net unit growth, the lifeblood of hotel operators, remains on solid footing at 7.2%. Hilton added 14,000 net additional rooms in the quarter, and it expects full-year net growth between 6% and 7%

Jacobs claimed that pretty close to half of the hotels that converted to a new branded hotel group in U.S. last year converted to Hilton brands instead of its rivals.

Hilton’s development pipeline swelled 7% to a record 503,400 rooms, providing runway for years of expansion even if economic conditions deteriorate. Nearly half of those rooms are under construction, with more than half located outside the United States. Hilton’s DoubleTree and Spark brands were especially popular with developers.

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