Monday, October 18, 2021

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    Hilton bets on the return of business travel

    Conrad Hilton was over 50 years old and ran a hotel for over 20 years before buying his first property in the suburbs of Texas in 1939. The hotel group he founded from a series of remodeled former banks and devastated lodges is now the oldest and second largest. in the world.

    The same patience is needed for current CEOs Chris Nassetta A century after Hilton was founded during the 1918 flu epidemic, he introduced the coronavirus crisis to the company.

    A variant of the delta coronavirus may have delayed the recovery of Hilton hotels by more than a month, but Nassetta told the Financial Times: .. .. 3-4 weeks isn’t really important. “

    At the beginning of summer, the hotel group was optimistic. As the blockade eased, demand stagnated from July to August for fully booked hotels and soaring room rates.

    “As much of the world reopens, the demand for travel we expected is rising,” Nassetta told investors in July.

    The second quarter of this year was the first time since a pandemic where Hilton did not report any losses. Total sales for the three months to the end of June exceeded $ 1.3 billion, net income was $ 128 million, and sales of $ 564 million and a loss of $ 432 million for the same period in 2020. Increased from.

    During the Labor Day weekend in September, Hilton’s total US hotel occupancy reached 85.7%. This is one of the best performances since the pandemic began.

    In the second quarter, the group repaid $ 1.2 billion of its outstanding debt. “We are confident in our balance sheet and financial flexibility as we move forward toward recovery,” Chief Financial Officer Kevin Jacobs told investors.

    But as companies get out of the summer slump, expectations for a rapid resurgence have receded, and one of the worst pandemic blows, the travel industry, wonders when businesses will return to what they were before Covid-19. I am thinking. ..

    Hilton’s largest market, the United States, lags behind other G7 countries in vaccination rates, and many companies are delaying large-scale harvests to staff offices. Business trips and meetings that the hotel traditionally relied on throughout the winter have been cancelled.

    Prior to the pandemic, business trips and group meetings accounted for approximately 70% of Hilton’s revenue.

    The group has already been pandemicly “beaten,” according to Nassetta. Last year’s overall loss was $ 720 million, in stark contrast to the $ 886 million profit reported in 2019.

    Old Mobley Hotel in Cisco, Texas

    Old Mobley Hotel in Cisco, Texas

    To monitor the crisis, Hilton announced in June last year that it would cut about 2,100 jobs. Withdrew the entire $ 1.75 billion revolving credit line and pre-sold $ 1 billion worth of loyalty points. It also issued $ 4.4 billion in bonds between April 2020 and January this year.

    Some rivals are investing more in leisure hotels to mitigate the expected decline in long-term business trips. Industry data provider STR predicts leisure travel will return to 2019 levels in 2023, but it will take until 2025 for the business to fully recover.

    Intercontinental Hotels Group Luxury resort brand While Hyatt Hotels acquired a luxury resort operator last month, it aims to grow 10 hotels annually. Apple leisure For $ 2.7 billion.

    Marriott, the world’s largest hotel chain and closest to Hilton, has retrained hotel staff focused on business in the city center to “better understand the needs and needs of leisure travelers. “I will,” Chief Executive Tony Capuano told FT this month. Hilton’s franchisee said that across the industry, hotel groups offer a very high priority for branding “symbolic leisure facilities.”

    But Nassetta said he wasn’t tempted to follow.

    The company considered an Apple leisure deal, but didn’t consider it “strategic,” according to sources close to Hilton’s senior management. [or] Economically meaningful additions. “

    Nassetta said: .. .. I hold the handle firmly. ”

    He added:I’ve been doing this for too long: leisure is coming down [business travel] Will come out. “

    Jeffreys analyst David Katz said: [Hilton’s] “With his own approval, he is always optimistic,” Nassetta added.

    This group has canceled or postponed some major events at the hotel as a result of the Delta variant.

    But Nassetta instead points out that short-haul business trips recovered to 80% of 2019 levels in the second quarter. “Most of the business trips are not, and these are [small and medium] Companies have to travel or they die, “he said.

    He also believes that corporate travel will return rapidly when white-collar executives realize they have lost their contracts because their rivals have decided to visit their clients directly.

    The investor certainly seems to be on his side. Hilton’s share is up 23% this year, down 17% at Marriott, 6% at Hyatt and 2% at IHG.

    Graph showing Hilton's share price rising compared to its rivals

    With business trips in mind, Hilton is driving the growth of Signia branded hotels with a focus on group meetings. In July, we opened our first Signia in Orlando and launched another Signia in Atlanta. Reportedly, the Fairmont Hotel in San Jose will reopen as Signia.

    The group said seven unique meetings were booked for next year, each with thousands of representatives.

    Signia Hotel in Orlando, Florida

    Hilton Opens First Signia Hotel in Orlando, Florida

    Bernstein analyst Richard Clark said the hotel could benefit from a more remote working world. Together, the hotel serves to accommodate those people. “

    However, Amar Lalvani, CEO of hotel group The Standard and former Marriott-owned Starwood executive, said it would be difficult for large hotel companies to adapt to this changing demand. Strict standards. “

    Hilton has crossed many large groups to adapt to the changing needs of its business customers. For example, we launched a service that allows groups of representatives from different locations to connect and speed up the check-in process with an app that allows guests to unlock their rooms over the phone without having to go to the reception.

    In Nassetta’s view, technology is a pandemic “major ocean change” in an industry that can be slow to adapt.

    He hopes it helps the industry’s “biggest problem in the world today”, especially in the United States and Europe, where there is a serious staff shortage. Daily housekeeping is now an on-request service, and Hilton is looking for nearly 3,000 roles across the UK and the US.

    Unlike Marriott, who told FT that they are enthusiastic about trading, the group is also cautious about M & A.

    Nassetta said:never say never [but] Much of running a large company only has discipline. Not doing to some extent is more important than doing. “

    Video: How the tourism industry recovers after a pandemic

    Hilton bets on the return of business travel Source link Hilton bets on the return of business travel

    The post Hilton bets on the return of business travel appeared first on California News Times.

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