Hilton stocks slide after it cuts its forecasts but says spin-offs on track
Hilton Worldwide Holdings cut its full-year forecasts for the third time today, citing weak travel demand in the US and political uncertainty in Europe slashing demand.
The hotel chain giant, which is in the process of turning itself into three separate entities, grew less than expected in the last quarter and issued a downbeat view for earnings in the next part of the year.
The results
The company said it expects its revenues to increase by between one and two per cent in 2016, down from previous predictions of two to four per cent.
Revenue rose 1.6 per cent from $2.9bn to $2.94bn but analysts had predicted $3bn. This may have been partly because total expenses rose 2.2 per cent in the last quarter.
System-wide revenue per available room – a key industry gauge – rose to 1.3 per cent, but it was expected to reach between two and four per cent.
Read more: HIG Capital sells Docklands DoubleTree by Hilton to Chinese group
The company earned 23 cents per share, in line with the predictions of analysts.
Management fees were up a whopping seven per cent from the same period last year, to $470m. However, it grew its development pipeline 15 per cent to 1,898 hotels – 300,000 rooms in 91 countries.
Why it's interesting
On Monday Chinese giant HNA Group said it would buy a 25 per cent stake in Hilton from its biggest shareholder, Blackstone Group, for $6.5bn. This saw shares soar.
But today shares are down 2.73 per cent at the news at its cut forecasts.
Hilton said earlier this year it would be spilling off a chunk of its hotels into a real-estate investment trust as it looks to slim down some areas of its business.
Hotels face a difficult market as competition spikes from online rentals such as Airbnb and attacks in Europe have cut travel demand.
What the company said
Christopher J. Nassetta, president and chief executive of Hilton, said: "Even with a macroeconomic environment that continues to underperform expectations, we delivered adjusted Ebitda and EPS, adjusted for special items, within our guidance ranges and continued to increase our global share of development activity this quarter.
He added:
We approved deals for 27,000 new rooms in 22 different countries on five continents and opened over 14,300 rooms this quarter. Our accelerating, capital-light growth is driven by all of our clearly defined brands, with each of our brand segments at record pipelines. Our brands currently represent 22 percent of all rooms under construction globally, or nearly five times their current share of room supply.