Hilton Worldwide Holdings pressed on with developing new hotels despite heavy losses last quarter.
The hotel giant opened 60 hotels with 6,800 new rooms last quarter despite reporting a net loss of $432 million in the second quarter. That’s down almost 66 percent from its net income of $261 million during the same period 2019. Still, the company grew its pipeline by 11 percent year over year to 414,000 rooms, executives said on a Thursday earnings call.
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CEO Chris Nassetta called the expansion of Hilton’s development activity a “pleasant surprise” that reinforces his view that hotel demand will return to 2018 to 2019 levels in about three years.
“We’re not crying in our milk. We’ve got a business to run,” he said. “This too shall pass.”
Nassetta also said Hilton is working closely with hotel owners on Hilton-managed properties to identify “significant savings” to all its brands’ operating cost structures. When asked if cost savings measures may include permanently suspending housekeeping services, he said “everything’s on the table.”
“We have owners that are really hurting,” he continued. “No business was built for no revenue.”
Some owners have sold hotels at deep discounts, or agreed to high interest rates on loans in order to secure cash amid uncertainty over ongoing government relief. Others have begun converting rooms into office space or remodeling properties into a members’ only clubs. Nassetta said Hilton has been doing deals with “dozens and dozens” of universities to convert limited service rooms into dormitories.
The majority of Hilton hotels are franchise properties, with under 1,000 hotels managed by Hilton and just 65 owned or leased by Hilton itself. Hilton’s revenues from all properties are down 77 percent year over year to $564 million from nearly $2.5 billion in 2019.
Revenue per available room worldwide fell 81 percent year over year for the period. In the U.S., the occupancy rate across Hilton hotels was 24 percent with RevPAR of $24.68 and an average daily rate of $101.17.
One in five of all Hilton’s hotels were closed at some point during the first six months of 2020, though the company said 96 percent were open as of July 31.
Write to Erin Hudson at ekh@therealdeal.com