Hilton Hotels (HLT) - Q3 2025 Earnings Call
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Call Details
Call Title: Hilton Hotels Q3 2025 Earnings Conference Call
Date held: October 22, 2025
Management team members present:
Chris Nassetta - President and Chief Executive Officer
Kevin Jacobs - Executive Vice President and Chief Financial Officer
Charlie Ruhr - Vice President, Corporate Finance and Investor Relations
Call Summary
Financial Performance
Hilton reported an adjusted EBITDA of $976 million for Q3 2025, reflecting an 8% year-over-year increase that notably “exceeded the high end of our guidance range.”
System-wide REFAR saw a decrease of approximately 1.1% year-over-year due to declining occupancy rates and adverse market conditions.
The diluted earnings per share adjusted for special items was recorded at $2.11, maintaining a positive trajectory despite industry headwinds.
The U.S. REVPAR showed a decrease of 2.3%, affected by economic uncertainty and declines in business transient travel, particularly within government-related sectors.
The company indicated that despite adverse conditions, it managed to generate solid free cash flow conversion expected to exceed 50% of adjusted EBITDA for the year.
Kevin Jacobs noted, “Our fee revenue continues to grow,” emphasizing a focus on non-REVPAR-driven fees supporting the financial results.
International trends painted a more favorable picture, as the Americas outside the U.S. experienced a REVPAR increase of 4.3%, spurred by strong leisure and group demand.
Lastly, the company remains optimistic, projecting flat to 1% REVPAR growth for the full year 2025.
Guidance
Hilton expects REVPAR growth of approximately 1% in Q4 2025, with adjusted EBITDA forecasted between $906 million and $936 million.
For the full year of 2025, guidance for adjusted EBITDA was set between $3.685 billion and $3.715 billion, illustrating robust operational resilience.
The company anticipates a flat to 1% REVPAR growth for the full year 2025, an indication of temperance in market recovery.
Looking forward, they expect net unit growth of 6.5% to 7% annually over the next several years, underpinned by a strong and innovative growth strategy.
Kevin Jacobs indicated, “We will be providing a more detailed analysis as we move through the budgeting process,” hinting at a forthcoming optimistic outlook.
Market conditions, including political events, are expected to improve with the run-up to major activities, contributing positively to overall business travel.
The overall momentum heading into 2026 is deemed favorable, with Chris Nassetta noting structural elements supporting long-term growth expectations.
Capital Allocation
Hilton plans to return approximately $3.3 billion to shareholders through buybacks and dividends throughout 2025, a strategy highlighting strong capital discipline.
The company has implemented cash dividends of 15 cents per share, sustaining investor returns while investing in future growth.
Kevin Jacobs confirmed, “We paid a cash dividend of 15 cents per share during the third quarter,” demonstrating consistency in shareholder remuneration despite market volatility.
The capital strategy includes prudent management of capital expenses, and fee reductions for owners to stimulate reinvestment into properties.
The creation of a system fees reduction program aims to reward ownership loyalty while ensuring quality standards within properties.
Enhanced cash flow generation and disciplined expense management continue to support capital allocation decisions.
The focus on capital-light development strategies remains integral, enabling Hilton to execute rapid unit growth with lower financial burdens.
Macro & Demand Trends
The current economic environment shows a mixed landscape, with Chris stating, “We remain optimistic about the next few years,” anticipating lower interest rates and a favorable regulatory atmosphere to stimulate traveling.
Challenges in the economy include “soft international inbound to the U.S. and declines in U.S. government-related travel,” affecting overall occupancy.
Chris expressed confidence in macroeconomic indicators, predicting “meaningful increases in travel demand” over the next years due to limited industry supply growth.
Events such as “midterm elections and America’s 250” anniversary are expected to drive increased domestic travel demand as businesses ramp up activities.
International leisure travel, particularly in Europe and the Middle East, demonstrates stronger demand, offsetting some U.S. declines.
Corporate travel sentiment remains cautious, with significant noise in the economic landscape affecting overall bookings. However, larger companies are expecting to increase travel budgets for 2026.
Economic growth forecasts suggest a supportive backdrop for Hilton’s operations, with anticipated investments from infrastructure bills and AI growth.
Competition & Product Updates
Hilton continues to expand its luxury and lifestyle brands, with approximately 20% of third-quarter openings belonging to these categories.
The launch of the new “Outset Collection by Hilton,” enhances the brand portfolio, catering to the upper mid-scale to upscale spaces, reflecting Hilton’s innovative approach to meeting evolving customer preferences.
Chris noted, “We expect nearly 40% of openings in 2025 to be conversions,” reflecting a strong conversion strategy that capitalizes on the growing supply of unbranded hotels.
Competitive pressures in the hotel industry remain, with Kevin Jacobs suggesting that despite challenges, “we believe fees per room will continue to grow over time.”
The completion of over 199 hotel openings totaling 24,000 rooms in Q3 showcases Hilton’s aggressive growth strategy, underscoring its competitive position in the market.
Hilton’s tech platform and modernization strategies give them an edge, allowing for rapid innovation and a robust customer experience framework.
The management expressed satisfaction with development momentum, citing strong unit growth prospects driven by “both new builds and conversions.”
NOTABLE QUOTES:
“Our third quarter results continue to demonstrate the resilience of our business.” – Chris Nassetta
“Adjusted EBITDA was $976 million in the third quarter, up 8% year-over-year.” – Kevin Jacobs
“We expect REVPAR to be flat to up 1% for the full year.” – Chris Nassetta
“We are well positioned to continue finding new efficiencies and strengthening our value proposition.” – Chris Nassetta
“We think we’ve always been on the tip of the spear in driving very efficient cost structures.” – Chris Nassetta
“Our proprietary tech platform has established Hilton as a pioneer and leader in hospitality technology.” – Chris Nassetta
“We expect to achieve net unit growth of between 6.5 and 7 percent in 2025.” – Kevin Jacobs
“Investment cycles are coming and sort of happening, but it takes time to get embedded in the economy.” – Chris Nassetta
“We want to help provide another incentive to accelerate investment in the system.” – Chris Nassetta
“We have always been pretty efficient in our operations relative to our size and scale.” – Chris Nassetta
Q&A Summary:
Q: Sean Kelly (Bank of America), Can you provide thoughts on the timeline for improvement in top-line performance?
A: Chris Nassetta responded that while specific guidance on REVPAR isn’t feasible until budget season, the backdrop for 2026 looks positive with expectations of reduced inflation and favorable economic policies. He stated, “If you lift up, there’s a lot of good going on in the U.S.”
Q: Stephen Gramblin (Morgan Stanley), What are your thoughts on partnerships with AI companies in terms of distribution?
A: Chris Nassetta mentioned that Hilton is actively engaging in this area, confirming that they are evaluating 41 AI use cases within the company to enhance operational efficiency, customer experience, and distribution strategies.
Q: Dan Pulitzer (J.P. Morgan), Can you explain the acceleration of net unit growth, specifically regarding conversions and new brands?
A: Kevin Jacobs clarified that the acceleration is a reflection of a broader recovery from COVID, noting that nearly 40% of growth will come from conversions, alongside new brand introductions to strengthen their portfolio.
Q: David Katz (Jefferies), How do you balance investments in the luxury segment?
A: Chris Nassetta explained the company’s focus on luxury is intended to create a “halo effect,” but reiterated that most growth will come from core brands while being cautious about expenditures to ensure profitability.
Q: Steve Pozzella (Deutsche Bank), Can you elaborate on the rationale behind system-wide fee reduction for owners?
A: Chris noted that the initiative aims to help owners improve their operations while simultaneously ensuring the brand’s quality standards are upheld to encourage further investment in properties.
Q: Brent Montour (Barclays), What trends are you seeing in corporate travel leading into Q4?
A: Chris expressed cautious optimism, stating that many corporate clients expect to increase travel budgets, although concerns still exist about broader economic noises affecting travel patterns.
Q: Lizzie Dove (Goldman Sachs), What are the trends in key money and competition?
A: Kevin outlined that competition for key money remains steady, emphasizing that Hilton’s advantageous brand recognition allows their development teams to successfully negotiate favorable terms without relying heavily on key money.
Q: Mike Bellisario (Baird), What pricing strategy are you employing in the current environment?
A: Chris stated Hilton often adjusts promotions to adapt to market conditions, experiencing balanced declines between rate and occupancy, while ensuring rate integrity remains a priority amidst a shift towards transient leisure bookings.
Q: Smedes Rose (Citi), What impact is the government shutdown having on your outlook?
A: Kevin affirmed that the government shutdown has been factored into their forecasts but indicated their projections are still viable despite ongoing disruptions, confirming that operational dynamics remain with anticipated economic recovery.
Q: Robin Farley (UBS), Is there anything unusual in fee revenue that could impact year-over-year comps?
A: Kevin Jacobs clarified that there are no concerning issues within fee revenue per room metrics, assuring that they are consistently aligned with Hilton’s focus on new mid-market brands contributing positively to overall revenue growth.
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