In uncertain earnings season, Hilton chooses optimism

McLEAN, Virginia – Hilton President and CEO Chris Nassetta freely admits he’s an optimist. So, it’s not surprising that he takes a positive spin on the current environment of the hotel industry.

“I would say, based on lots of discussions and years of experience, that at the moment, the risk in the marketplace is weighted too heavily to the downside,” Nassetta said during the company’s first-quarter earnings call. “If I look at what’s going on in our business, certainly, we’ve seen a modest step back in demand patterns. But, at the moment, those seem to be relatively stable.”

Nassetta said he’s been through several recessions and black swan events in his 40 years in the industry. He lives in the Washington, D.C. area and talks to a lot of people on Capital Hill and in the current administration to get a gauge of what’s going on. He said he’s an optimist in a room that is skewing negative right now.

“My own view is… the market is asymmetrically taking the risk of downside,” he said. “I think it’s a much more equally weighted risk. I am an optimist by nature… The intermediate to longer-term risk is probably more weighted on the upside.”

Whether it’s market uncertainty, tariffs and trade deals, lowering regulations or extending tax cuts, Nassetta said you can criticize the process, but he thinks “real progress is being made.”

“It’s choppy and there’s a lot of noise, but the legislative process is grinding through… There’s a reasonable probability that [it all] gets done, which is going to create maybe not perfect stability, but a lot more stability, a lot more certainty of what the deals look like and what the future is," he said. "It’s not crazy to think that all that starts to come together this summer, and as a result, when you get to the second half of the year, you could be in a very different place.”

All eyes were on Hilton on Tuesday as it was the first major U.S. hotel company to report this earnings season. There has been speculation about whether the company will pull its guidance for the rest of the year, as some airline companies have cited an uncertain environment. The company revised its guidance for the rest of 2025, trimming full-year room revenue growth. RevPAR was lowered to flat to +2% (versus +2% to +3%) previously, while adjusted EBITDA was cut by 1.1%. Hilton said full-year net income will be $1.71-$1.75 billion, compared to $1.83-$1.86 billion.

On the positive end, Hilton beat Street expectations and said net unit growth for the year is projected to be between 6-7%. For the second quarter, Hilton forecasts system-wide comparable RevPAR to be roughly flat compared to the second quarter of 2024. Adjusted EBITDA is forecasted to be $940-$960 million.

Nassetta said Hilton knew that many companies had not issued guidance and that his view was very simple.

“We know more about our business than anybody else,” he said. “I think we do, and I feel like we have an obligation, even in uncertain times, to give you a sense of the various outcomes that we think based on assumptions… We’ve tried to be as scientific as possible. I feel very good about how we thought that through.”

‘Wait-and-see mode’

Nassetta said broader macro uncertainty intensified in March, and RevPAR growth was led by the group business, which increased more than 6% year-over-year, supported by growth in urban markets. Transient RevPAR increased by 2%, which was led by a solid performance from small- and medium-sized businesses, which Nassetta referred to as “resilient customers” and make up roughly 85% of Hilton’s business.

“We believe travelers are largely in a wait-and-see mode as the rapidly changing macro environment continues to unfold,” he said.

Hilton doesn’t give guidance lightly, Nassetta added. “It’s super granular analysis, and when we give guidance, it’s because we feel really good about it,” he said. “You can see in the first quarter we have a huge amount of momentum on conversions. The things under new under development and new construction are in process that they’re going to deliver this year. They’re largely getting close to being done… If you look at the quarter, the data suggests everything looks great. Signings are up, starts are up, deliveries are up on a year-over-year basis.”

Nassetta also said the guidance doesn’t come without risk, especially if his optimistic interpretation is wrong. “So far, we haven’t seen any real impact… If this persists, if I’m wrong, then the uncertainty of this level persists for a longer time… It’s just logical and rational to think it would have some impact...

“However, if I’m right, and things do start in the second half of the year to settle down, I don’t think you have to believe that this has a lot of impact,” he said.

Nassetta also said, when asked about growth and potential M&A, that Hilton is still focused on organic growth but will be launching three new brands in the future: a couple in the lifestyle space under Tapestry, a hard brand in between Motto and Canopy and one in the furnished apartment space.

“My expectation is you will see us do something there,” he said. “We look at everything… but we have made great progress over 20 years of doing it the old-fashioned way. We’ve built a skill set and a team that is good at this… We have 24 brands, and my guess is in the next year or two, we’re going to have 27 that we think will continue to fill niches… That’s the likely path.”

What the analysts said

Analyst Michael Bellisario of R.W. Baird said he expects Hilton to eventually acknowledge “incremental U.S. development headwinds/uncertainties” and point toward the lower end of guidance for NUG growth. He also said the RevPAR guidance cut isn’t surprising.

“We believe the 150 [basis points] reduction at the midpoint is plus/minus in line with recent buy-side expectations,” he said.

Analyst C. Patrick Scholes with Truist Securities said he credits Hilton with providing full-year guidance, which could set expectations for the big hotel companies.

“We are not surprised to see guidance light for 2Q and lowered for [full year]. We commend [Hilton] for still providing full-year guidance and we could expect other hotel companies to follow suit. For now, we believe the lower end of the [full-year] guidance range is the more likely outcome than the higher end of guidance. Implied [second half 2025] RevPAR guide is -1% to +2.75%, and we struggle to assume a 2H25 acceleration to hit the high-end of the revised RevPAR guide.”

Other first-quarter highlights

• Diluted EPS was $1.23; diluted EPS, adjusted for special items, was $1.72; net income was $300 million; and adjusted EBITDA was $795 million.

• Hilton opened 186 hotels, totaling 20,100 rooms, resulting in 14,000 net room additions. Hilton expanded its luxury and lifestyle portfolios, which accounted for approximately 30% of all hotel openings in the first quarter. Marquee openings in April included Waldorf Astoria hotels in Osaka, Japan, and Punta Cacique, Costa Rica.

• The company added 32,600 rooms to the development pipeline during the first quarter, as of March 31, its development pipeline totaled 3,600 hotels representing 503,400 rooms (+7% YOY) throughout 123 countries and territories, including 27 countries and territories where it had no existing hotels.

• Additionally, nearly half of the rooms in the development pipeline were under construction, and more than half were located outside of the U.S.

By Rob Schneider