When it comes to how Hilton will keep its net unit growth in the 6-7% range, something CEO Chris Nassetta said should be the case “for the next several years”, he’s confident that growth will come organically. A significant part of that confidence stems from the company’s ability to drive conversions.
“Our focus… is on getting back to brand building the way we do it, where we see legitimate white spaces that are opportunities to continue to build our network and add to our growth,” Nassetta said during Hilton’s second quarter earnings call on Wednesday. “So the entire organizational focus is there.”
Nassetta said he doesn’t think M&A for NUG growth will be a focus in the coming years (although he did mention he’s almost bound to say “never say never”).
“We’re not out bounty hunting to do acquisitions,” he said. “So the way you should think about the 6-7% (NUG growth) is that it does not imply that we’re going to go out and buy anything, that implies our existing and new brands are going to deliver that kind of growth.”
Hilton will be adding more brands, Nassetta said, noting that the company is working on expanding its offerings, likely by the end of the year.
“The team is working hard behind the scenes on several new brands in the lifestyle space, in addition to a couple of new concepts in the alternative accommodation space, a number of which are conversion-friendly,” he said. “We have done the research with our customers and have already received tremendous feedback from our owners on these new brands.”
Overall, conversions account for over a third of Hilton's openings in the second quarter. Nassetta said construction starts are also way up.
“Our starts are going to be up 16-17% this year, and once they start, almost 99-100% of the time they finish. We’ve seen those numbers, even in a very challenging environment, tick up, so that makes us feel really good,” he said. “We have the biggest pipeline in our history. Half of it’s under construction and we continue to see more and more going under construction.”
Hilton approved 36,200 new rooms for development during the second quarter, bringing its development pipeline to a record 510,600 rooms, a 4% increase year-over-year, excluding the impact of acquisitions and strategic partner hotels. The company added 26,100 rooms to its system, resulting in 22,600 net additional rooms for the second quarter, which contributed to a net unit growth of 7.5% over the past year.
On the not-so-positive front, Hilton reported a systemwide RevPAR decline of 0.5% year-over-year. Nassetta said the quarter turned out to be “noisier than expected.” Hilton expects its third-quarter RevPAR to be flat to modestly down again, but the ever-optimistic Nassetta said he’s positive about what can happen later this year. He noted that after potential tariffs were announced, people were rattled and “everything kind of froze up,” but he sees a time, especially in the fourth quarter and in the coming years, where things are thawing out.
“People are getting out of the wait-and-see. Certainly, if you look at 2026 and 2027, you’re seeing it,” he said. “There’s so much noise in the system right now, politically and otherwise… but if you really lift up and look at what’s going on in our largest market, the US, which is 75% of our business, you may hate or like what’s going on, but it is pretty hard to deny that over the next several years, we’re not going to end up in a condition where we’re going to have incremental economic growth.”
For its full-year projections, Hilton stated that 2025 systemwide RevPAR is projected to be flat to +2% compared to 2024; full-year net income is projected to be between $1.64 billion and $1.682 billion, and full-year adjusted EBITDA is projected to be between $3.65 billion and $3.71 billion.
Other Q2 highlights
Diluted EPS was $1.84 and diluted EPS, adjusted for special items, was $2.20
Net income was $442 million
Adjusted EBITDA was $1.008 billion
Systemwide comparable RevPAR declined 0.5% YOY
Hilton repurchased 3.2 million shares of its common stock during Q2, bringing total capital return, including dividends, to $791 million for the quarter and $1.881 billion year to date
Full year 2025 capital return is projected to be approximately $3.3 billion
What the analysts said
Analyst Michael Bellisario of R.W. Baird said his company’s positive fundamental view of Hilton is unchanged.
“High expectations and slightly weaker 2Q25 core results holding back stock performance. Several timing items, including termination fees and lower G&A expense, drove the 2Q25 earnings beat, while RevPAR growth missed our forecast; full-year guidance ranges were maintained,” he said. “Fundamentally, the near-term outlook is plus/minus unchanged looking through all the moving pieces — RevPAR is a touch softer, particularly domestically, but the trajectory of net unit growth is improving, which has been a key investor debate recently.”
Analyst Patrick Scholes of Truist Securities said Hilton’s Q2 earnings were well ahead of consensus, but there are longer-term concerns about NUG growth.
“The company does an excellent job in looking through nearer-term softness and pointing investors to longer-term opportunities, probably the best in the business at this,” he said. “A hot topic for investors today: How does HLT get to 6-7% organic NUG growth for 2026 (and perhaps for 2027+) despite the “very limited (overall) industry supply growth” that management called out on the earnings call? We see it primarily driven by ‘self-help’ initiatives on filling in what ‘white space’ remains.”
By Rob Schneider
