Q3 REVIEW
Slow Down — So What ?
FOR HILTON , SLOWING REVPAR DOESN ’ T MEAN A REDUCTION IN PERFORMANCE .
By DAVID EISEN
Global RevPAR at Hilton increased 1.4 % in the third quarter compared to the same time a year ago , but there wasn ’ t a hint of worry from CEO Chris Nassetta during a call with analysts . In fact , a slowing environment might just be a catalyst for further Hilton growth .
Part of the optimism is based on current market dynamics that makes it increasingly challenging to build new hotels . In order to grow , hotel companies are turning to conversion opportunities to fuel net unit growth . “ We ’ re taking a very disproportionate share of conversion opportunities around the world ,” Nassetta said . In the third quarter , conversions accounted for 60 % of Hilton openings , driven , Nassetta said , by the addition of SLH properties and “ continued momentum ” from Spark , Hilton ’ s premium economy conversion brand , which accounted for 20 openings in the quarter , with open hotels in both the U . S ., the U . K . and Canada , and plans to open hotels in Germany and Austria before the end of the year . “ The brand ’ s pipeline is three times larger than its existing supply , and we expect continued launches in international markets to further boost Spark ’ s trajectory positioning ,” Nassetta said .
Expectations for the rest of the year and into 2025 are for hotel transactions to pick up after several sluggish quarters . Part of the surge , said Kevin Jacobs , Hilton ’ s CFO and president of global development , is a narrowing of bid / ask spreads , meaning sellers and buyers are closer on an agreed sale price . Conversions depend on a healthy transactions market . “ There ’ s a lot more conversations around changes of ownership , which supports conversions ,” Jacobs said . “ You ’ ve had pretty wide spreads between bid and ask on transactions and transactions drive a lot of conversions . We are seeing a little bit of a thawing in bid / ask spreads , which has led to more applications in the last 30 days or so on change of ownership . We ’ re starting to see a lot of more activity there .”
To be sure , convincing an owner or a new owner of an asset on a certain brand takes not only persuasion but numbers to back it up . Two of Hilton ’ s biggest traits , Nassetta said , are its scrappiness and drive to win deals . “ I don ’ t know what everybody else is doing , but we ’ re hustling ,” he said . “ We have really solid relationships where we ’ ve done a really good job , which leads to what is really driving it , which is performance . These people are investing billions of dollars and they want to know they ’ re going to make money .”
Especially in a torpid RevPAR environment , where there is a flight to brands considered to deliver the highest amount of return on investment . “ There are benefits of the environment we ’ re in ,” Nassetta said . “ In more difficult environments , environments where financing is less available , we end up disproportionately getting more conversions and more of what is available for new construction , because our brands are just more financeable . This environment has not been terrible for us .”
Stiff competition for conversions sometimes even means having to show owners the money — up front . Key money , or a payment made by a hotel operator or franchisor to a hotel owner to secure a management or franchise agreement , is a way to induce an owner to select a
52 hotelsmag . com Jan / Feb 2025