Hilton says China demand to be volatile near-term, sees gradual recovery

Reuters

Published Feb 09, 2023 06:07AM ET

Updated Feb 09, 2023 12:31PM ET

By Priyamvada C

(Reuters) -Hilton Worldwide Holdings Inc expects demand for stays in China to be volatile in the near term due to rising COVID-19 infections, the hotel operator said on Thursday, but sees the key tourism market gradually recovering through the year.

"I mean the environment created a drag... before it was lockdown, now they reopen and everybody gets sick, but the net result is a drag on business activity," said Hilton's finance chief Kevin Jacobs during an investor call.

The comments came after Hilton missed its room growth expectations for 2022, pressured by the COVID environment in China, where restrictions were abruptly lifted after protests.

Hilton, which gets a sizeable chunk of its revenue from outside the United States, reported net unit growth of 4.7% in 2022, below its earlier forecast of about 5%.

"They probably for the first time in quite a while missed on unit growth blaming on China so that obviously one of the reasons that their unit growth has been a bit softer," Bernstein analyst Richard Clarke said.

China's strict COVID curbs had halted construction of some luxury properties and impeded travel to a key global tourism market. The country had been a black spot in an otherwise bright 2022 for the industry.

However, Hilton reported robust results for the fourth quarter ended Dec. 31, aided by strong travel demand despite mounting economic worries.

For the quarter, Hilton said revenue per available room, or RevPAR - a key metric for investors - rose 24.8% on a currency neutral basis from a year earlier.

Excluding items, Hilton earned $1.59 per share, beating analysts' expectations of $1.22 per share. Its revenues rose about 33% to $2.44 billion, compared with estimates of $2.38 billion, according to Refinitiv data.