Hilton Worldwide Exceeds High End of Guidance for Third Quarter 2014 RevPAR, EPS and Adjusted EBITDA: Raises Full Year Outlook

Hilton Worldwide Exceeds High End of Guidance for Third Quarter 2014 RevPAR, EPS and Adjusted EBITDA: Raises Full Year Outlook

 

 

Almasalla, ATP News- MCLEAN, Va. – Hilton Worldwide Holdings Inc. ("Hilton," "Hilton Worldwide" or the "Company") (NYSE: HLT) today reported its third quarter 2014 results and raised its full year 2014 outlook.

 

 

Highlights include:

 

• EPS was $0.19 for the third quarter; EPS, adjusted for special items was $0.18; net income attributable to Hilton stockholders for the third quarter was $183 million
 

• Adjusted EBITDA for the third quarter increased more than 13 percent from the same period in 2013 to $645 million and Adjusted EBITDA margin increased 160 basis points

 

• System-wide comparable RevPAR increased 8.4 percent for the third quarter on a currency neutral basis from the same period in 2013
 

• U.S. comparable RevPAR increased 8.8 percent for the third quarter from the same period in 2013
 

• Management and franchise fees for the third quarter increased 16 percent from the same period in 2013 to $383
million
 

• Gross operating profit margins for comparable owned and operated hotels increased over 150 basis points forthe third quarter compared to the same period in 2013

 

• Opened more than 12,000 rooms in the third quarter for a total of nearly 30,000 rooms through September 2014
 

• Approved 20,000 new rooms for development during the third quarter, growing its industry-leading development pipeline to 1,269 hotels, consisting of approximately 215,000 rooms, as of September 30, 2014
 

• Reduced long-term debt by $250 million during the third quarter and another $100 million in October 2014, for  a total reduction of $800 million through October 2014; raised full year guidance for voluntary debt prepayments to between $900 million and $1.0 billion

• Increased outlook for full year 2014 Adjusted EBITDA to between $2,470 million and $2,490 million
 

• Full year 2015 RevPAR expected to increase between 5.0 percent and 7.0 percent and net unit growth expected to be between 40,000 rooms and 45,000 rooms, a 6.0 percent to 7.0 percent increase in managed and franchised rooms2
 

Overview

For the three months ended September 30, 2014, earnings per share ("EPS") was $0.19 compared to $0.22 for the three months ended September 30, 2013.
 

 

 Adjusted EBITDA increased over 13 percent to $645 million for the three months ended September 30, 2014, compared to $570 million for the three months ended September 30, 2013 and net income attributable to Hilton
 

stockholders was $183 million for the three months ended September 30, 2014 compared to $200 million for the three months ended September 30, 2013.

 

For the nine months ended September 30, 2014, EPS was $0.52 compared to $0.42 for the nine months ended September 30,
2013.

 Adjusted EBITDA increased 14 percent to $1,840 million for the nine months ended September 30, 2014, compared to $1,607 million for the nine months ended September 30, 2013 and net income attributable to Hilton stockholders was $515 million for the nine months ended September 30, 2014 compared to $389 million for the nine months ended september 30, 2013.
 

Christopher J. Nassetta, President & Chief Executive Officer of Hilton Worldwide, said, "We had yet another strong quarter that exceeded our expectations for RevPAR, EPS and Adjusted EBITDA growth, and as a result, we have increased our outlook for the year.
 

"The global presence of our industry-leading brands continues to increase, with over 12,000 new rooms opening during the
third quarter.

Globally, we remain number one in rooms under construction, rooms in the pipeline and room supply," Nassetta added.

"Recently, our Luxury & Lifestyle brands noted significant accomplishments, with the launch of our 12th brand, Canopy by Hilton, which we believe will redefine the lifestyle category.
 

Also, our planned sale and long-term management of the Waldorf Astoria New York, which after a major renovation by the new owner will return the iconic property to its historic grandeur, is expected to unlock significant value for shareholders."

 

Segment Highlights

Management and Franchise Management and franchise fees were $383 million in the third quarter of 2014, an increase of 16 percent compared to the same period in 2013.

 

Excluding $3 million of affiliate management fees that are not comparable year over year as a result of a modification to certain affiliate management agreements, management and franchise fees increased 15 percent.

 RevPAR at comparable managed and franchised hotels in the third quarter increased 8.6 percent on a currency neutral basis (an 8.4 percent  increase in actual dollars) compared to the same period in 2013.
 

The increase in RevPAR at comparable managed and franchised hotels, new units and incentive fee participation rates have yielded continued fee growth during the third quarter of 2014, including base and incentive management fees, which increased 14 percent and 21 percent, espectively, compared to the same period in 2013, excluding a $5 million reclassification from base to incentive fees in the third quarter of 2014 for a small group of hotels.

Ownership

Revenues from the ownership segment were $1,087 million in the third quarter of 2014, an increase of 8 percent from the same period in 2013.

Ownership segment Adjusted EBITDA for the third quarter of 2014 was $260 million.

 

 Ownership segment Adjusted EBITDA increased 16 percent(1) from the same period in 2013 and Adjusted EBITDA margin increased 161 basis points(1). RevPAR at comparable hotels in the ownership segment increased 7.3 percent on a currency neutral basis (an 8.0 percent increase in actual dollars) in the third quarter of 2014 compared to the same period in 2013, led by an increase in RevPAR of 9.0 percent at comparable ownership segment hotels in the United States.
 

 Outside of the United States, RevPAR at comparable ownership segment hotels increased by 5.0 percent on a currency neutral basis (a 6.5 percent increase in actual
dollars).

Hilton Worldwide continues to make progress executing on value enhancement opportunities embedded in its owned portfolio.
 

As recently announced, Hilton Worldwide entered into an agreement to sell the Waldorf Astoria New York hotel for $1.95 billion.
 

 As part of this long-term partnership, Hilton Worldwide will continue to manage the property for the next 100 years under the Waldorf Astoria Hotels & Resorts brand.

Timeshare

Timeshare segment revenue and Adjusted EBITDA for the third quarter of 2014 were $295 million and $78 million, respectively, compared to $302 million and $86 million, respectively, for the same period in 2013.
 

Resort operations revenue increased $7 million compared to the third quarter of 2013.

 

 As a result of the deferral of revenue recognition on sales of certain of our owned timeshare inventory, timeshare sales revenue decreased approximately $20 million, offset by a $4 million increase in fees for selling timeshare intervals on behalf of third-party developers.
 

 On a year-to-date basis, timeshare segment Adjusted BITDA increased 13 percent from the same period in 2013 to $232 million.
 

During the third quarter of 2014, 58 percent of intervals sold were developed by third parties.

 

Hilton Worldwide’s supply of third-party developed timeshare intervals was approximately 106,000, or 81 percent of the total supply, as of September 30, 2014.
 

 Hilton Worldwide continues to expand its overall supply of timeshare intervals and as of September 30, 2014, had approximately 131,000 intervals, or six years of projected supply at the current sales pace.

Development

Hilton Worldwide opened 70 hotels with over 12,000 rooms in the third quarter of 2014, over 30 percent of which were conversions from non-Hilton brands, and achieved net unit growth of over 11,000 rooms.
 

 
As of September 30, 2014, Hilton Worldwide had the largest rooms pipeline in the lodging industry, according to Smith Travel Research, Inc.
 

("STR"), with approximately 215,000 rooms at 1,269 hotels throughout 74 countries and territories, of which 56 percent, or approximately 119,000 rooms, were located outside of the United States.

 Over half of the development pipeline, or approximately 109,000 rooms, were under construction. According to STR, Hilton Worldwide has the largest share of rooms under construction and rooms in the pipeline on a global basis(1)
 

.
On October 15, 2014, Hilton Worldwide launched its newest brand: Canopy by Hilton.

 

This brand represents a new hotel concept that redefines the lifestyle category, offering simple, guest-directed service, thoughtful local choices and comfortable spaces for a positive stay, as well as delivering the many benefits of Hilton    worldwide’s system, including the Hilton HHonors guest loyalty program.
 

 Letters of intent have been signed for 11 properties and Hilton Worldwide expects to open the first
Canopy hotel in 2015.

Balance Sheet and Liquidity

During the third quarter of 2014, Hilton made $250 million of voluntary prepayments on its senior secured term loan facility.

In October 2014, Hilton made an additional $100 million voluntary prepayment, bringing the total voluntary  epayments to $800 million through October 2014.
 

As of September 30, 2014, Hilton had $11.1 billion of outstanding indebtedness with a weighted average interest rate of 4.1percent, excluding $937 million of non-recourse debt.
 

Total cash and cash equivalents were $831 million as of September 30, 2014, including $288 million of restricted cash and cash equivalents.

 No borrowings were outstanding under the $1.0 billion revolving credit facility as of September 30, 2014.

 

Outlook  Full Year 2014

• System-wide RevPAR is expected to increase between 6.0 percent and 7.0 percent on a comparable and currency neutral basis, with ownership segment RevPAR expected to increase between 5.0 percent and 6.0 percent on a comparable and currency neutral basis as compared to 2013.

 

 Adjusted EBITDA is projected to be between $2,470 million and $2,490 million.
 

• Management and franchise fees are projected to increase approximately 13 percent to 15 percent.

 

• Timeshare segment Adjusted EBITDA is projected to be between $315 million and $330 million.

 

• Corporate expense and other is projected to increase between 3 percent and 5 percent, including incremental public company costs.
 

• Diluted EPS, adjusted for special items, is projected to be between $0.69 and $0.71.
 

• Capital expenditures, excluding timeshare inventory, are expected to be approximately $350 million.

 

• Net unit growth is expected to be approximately 35,000 rooms to 40,000 rooms, a 5.5 percent to 6.5 percent increase in managed and franchised rooms.

 

Fourth Quarter 2014

• System-wide RevPAR is expected to increase between 6.0 percent and 7.0 percent on a comparable and currency neutral basis compared to the fourth quarter of 2013.
 

• Adjusted EBITDA is expected to be between $630 million and $650 million.

 

• Management and franchise fees are expected to increase approximately 12 percent to 14 percent.

 

• Diluted EPS, adjusted for special items, is projected to be between $0.16 and $0.18.
 

Full Year 2015

 

For 2015, we expect system-wide RevPAR to increase between 5.0 percent and 7.0 percent on a comparable and currency neutral basis compared to 2014.

 Given our strong development pipeline, unit growth should accelerate in 2015 as our global system of rooms is expected to expand by 40,000 rooms to 45,000 rooms on a net basis, a 6.0 percent to 7.0 percent increase in managed and ranchised rooms.