Hilton CEO Christopher Nassetta told analysts during the company’s Q1 earnings call Tuesday that travelers appear to be in a “wait-and-see mode,” pointing to a modest pullback in first-quarter demand amid a “rapidly changing macro environment.”
“Broader macro uncertainty intensified in March, which pressured demand, particularly across leisure,” said Nassetta.
As a result, Hilton downwardly revised its 2025 forecast for revenue per available room (RevPAR). In February, Hilton was forecasting RevPAR growth of 2-3% for the year. Now Hilton forecasts zero growth to a 2% decline.
Hilton reported first-quarter RevPAR growth of 2.5%, bolstered by strong momentum from late 2024 that carried through into January and February before softening in March.
Group business emerged as the quarter’s strongest performer, increasing more than 6% year over year, while RevPAR from business travel grew 2% and leisure 1%. While group business has been a high performer in recent quarters, Nassetta said even that segment has slowed down in the last six weeks or so.
Complexity in U.S. inbound travel
During the call, Nassetta responded to concerns about reduced cross-border travel to the U.S. from Mexico and Canada.
He said Canadian and Mexican stays at U.S. hotels are down in the “high single digits,” but that the decline was more than offset by increased travel from Asian countries, the U.K. and parts of Europe. He said revenue from inbound U.S. travel was up “mid single digits” in the first quarter, but that there was volatility.
“It was up a lot in January, a little bit less in February, and it was sort of flat in March,” Nassetta said. He suggested that the weaker dollar may be a factor in an increased visitation from some markets.
Inbound travel to the U.S. is about 4% of Hilton’s business, Nassetta said.
Nassetta: Uncertainty will dissipate
Regional performance showed mixed results during the full quarter, with RevPAR increasing 2.1% in the U.S., 7% in the Americas outside the U.S., 2.6% in Europe and 8.5% in the Middle East and Africa. Asia Pacific was flat, and China declined 3.1%.
Looking ahead to Q2, Nassetta said Hilton is forecasting “approximately flat” RevPAR compared to the prior year.
He pushed back against what he described as overly pessimistic market sentiment.
“What’s going on right now is this sort of asymmetrical risk to the downside because of a high degree of uncertainty,” said Nassetta. He believes that uncertainty will wane over the next couple of quarters, “and that will allow the underlying strength of the economy to shine through again.”
Hilton reported Q1 net income of $300 million, an 11.9% increase, while adjusted EBITDA was up 6%, to $795 million.
More brands are on the way
Later in the call, Nassetta discussed a brand-expansion strategy, with Hilton expecting to go from 24 brands to at least 27 within two years.
The planned additions include a lifestyle collection under Tapestry for “unique hotels,” a furnished-apartment concept for the extended-stay market, and a brand positioned between Motto and Canopy.
Motto and Canopy both are lifestyle urban brands. Motto is in the upper-midscale category and is Hilton’s micro-hotel concept, with hotels having compact guestrooms. Canopy is an upper-upscale brand with hotels featuring local cultural elements.
Nassetta said upcoming new brands “will fill niches within the family of brands and provide customers some great opportunities.”