Chris Nassetta is wickedly optimistic about why Hilton is “defying gravity” in a challenging hotel environment.
For its fourth quarter and full-year 2024 earnings, Hilton reported 6.5% year-over-year revenue growth, systemwide RevPAR growth, a record pipeline and net unit growth of 7.3% as part of its fourth quarter and full-year 2024 earnings.
“How are we defying gravity in what’s been a difficult environment for new construction and development generally?” asked Nassetta, president and CEO of Hilton. He said the answer comes down to how the company’s brands perform.
“While there isn’t as much money [for financing available]… we are getting a very disproportionate share,” he said. “We’re just more financeable with the money available for new construction. Because our brands perform the best in the industry, we get a large disproportionate amount of conversion opportunities.”
On the earnings call, Nassetta said he felt “incrementally” better than he did in the third quarter and now expects systemwide top-line growth of 2% to 3% for 2025. That includes steady growth in the Americas, modest deceleration in EMEA due to tough comparisons following a robust 2024, and broad growth across all of Asia Pacific because of improvements in China and across the region. Nassetta also expects positive RevPAR growth across all segments driven by group outperforming and continued strength in the MICE business. He even expects modest RevPAR growth in leisure transient driven by further momentum in large corporate businesses coupled with steady demand across small- and medium-sized businesses.
The optimism extends to construction starts, of which the company had record numbers in 2024 and finished up 10% year-over-year. Hilton finished 2024 with nearly a quarter million rooms under construction, more than any other hotel company. It also represented more than 20% of the industry share of rooms under construction with nearly half of its current pipeline under construction. That translates to a projection of strong net unit growth with Hilton projecting NUG of 6% to 7% in 2025.)
Nassetta said his optimism comes from talking to his owners and the broader business community. He said uncertainty around the election was creating a lot of “noise” in the market, and the fact that it was quickly resolved has created this sense of optimism because of the potential of lighter regulations and tax cuts.
“There is a broad belief, and I would say, fairly consistent, amongst the folks that I talk to across a broad range of industries, that people think the opportunity for economic growth in the short to intermediate term will be better,” he said. “That doesn’t mean people don’t think there’s noise… But, almost to a person, people feel like you’re going to see an opportunity for a pickup more broadly in economic growth and an opportunity in our business as a result, for a bit of an uptick.”
That’s not to say there isn’t still a sense of caution, Nassetta said. “The reason we’re not going crazy in our guidance… in building big upside is because a lot is happening. It’s early and I think we need to see how these things play out,” he said.
M&A environment
When asked about comparing his optimism to the broader skepticism over the development environment that many heard at the Americas Lodging Investment Summit by Northstar (ALIS) last week in Los Angeles, Nassetta said that was also based on things he heard at the conference.
“I break it down into how people felt about M&A activity versus how they’re feeling about new development activity,” he said. “My read of it… was generally on the first, M&A, was much more positive. People are very much [thinking] that there’s more capital available. Rates have moved up a bit. But there’s a belief that over the next 12 to 24 months, broadly, that rates will come down. I think people feel like the bid-ask [spread] is getting closer because performance has ticked up a bit.”
Nasseta said he wasn’t alone, as there was broad optimism on the CEO panel he was on that opened the first day of ALIS. “The answer for most of the folks on the panel was a lot more optimism in M&A,” he said, noting there’s more friction on the development side.
But Nassetta said that based on conversations with Hilton owners, there’s more development optimism in the air. “I do believe people are seeing more availability of capital. It’s not a gusher, but they’re seeing more,” he said. “I want to be careful to say it wasn’t raging optimism, but a bit of a shift, at least amongst our owner community.”
