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Hilton: bigger-than-expected quarterly profit

Hilton announced solid results for the first quarter of 2017/2018 and raised its outlook for the full year, citing favourable economic trends and rising business and consumer confidence.

During the first quarter 2017/2018, Hilton reported net income of $163 million and adjusted EBITDA amortization up 9% to $445 million. The US posted a +3.9% growth in RevPAR and particularly solid results in Europe and the Asia-Pacific region.

In terms of unit growth, 75 hotels (10,600 rooms) opened. A development of +7% compared to the same period with 25,700 new rooms under development. That brings the number of hotels to 2,340 (355,000 rooms) in 106 countries, including 38 countries and territories where Hilton does not currently have any open hotels. It should be noted that nearly 187,000 rooms in the pipeline - more than half - are located outside the U.S. 

Chris Nassetta, CEO-President, Hilton said that the macroeconomic picture supports the idea that both his company and the hotel industry should remain optimistic. “I know the cycle is a lot longer than usual, which worries everybody, but I’m not sure it should, necessarily,” he said.

An increase in demand coupled with an expectation of supply growth means that supply-demand dynamics will remain positive for the hotel industry. As a result, Hilton has revised its full-year RevPAR guidance up to between 2% and 4%. Indeed, Chris Nassetta expects the final number to be in the higher end of this range.

In addition, Hilton experienced some of its strongest growth numbers in China, where the company expects full-year RevPAR to increase by more than 10%. Chris Nassetta highlighted Hilton's efforts to develop the Hampton Inn brand in China with the help of its partner Plateno. "They’re doing a wonderful job in terms of what the product is and delivering service and helping build our network out," he said.

In contrast, its American competitor MGM Resorts International experienced a significant decline (-10%) due to activity in Mandalay Bay and other Las Vegas properties. James Murren, CEO, MGM Resorts said Mandalay Bay is not recovering as quickly as expected from the October 1, 2017 mass shooting. As a result, RevPAR will only increase from up to +1% to +3% this year, whereas the leisure group forecast +2% to +4% last February. Disruptions due to the remodeling of the Monte Carlo Resort, a delayed boxing match and weaker April results weigh on the outlook.


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