Hilton profits fall 57 percent following IPO

February 27, 2014

Fourth-quarter earnings fell 57 percent at Hilton Worldwide, in part because of costs related to its recent public offering, the company reported Thursday.

The McLean-based hotel company is in the midst of a rapid expansion, with 195,000 new rooms slated to open in coming years. Much of that growth will be outside the United States.

“We continue to expand existing brands geographically, and we will continue to explore new brands to serve even more customers and owners in the future,” Hilton chief executive Christopher J. Nassetta said in his first earnings call with investors since the company went public.

Hilton returned to the New York Stock Exchange in mid-
December after six years of ­private-equity ownership by Blackstone. The chain raised $2.35 billion in its initial public offering, marking the largest IPO by a hotel company.

For the fourth quarter, the hotel giant posted earnings of $26 million, or 3 cents per share, down from $61 million, or 7 cents per share, a year earlier. Revenue, meanwhile, rose 13 percent, to $2.64 billion.

For the year, Hilton reported a profit of $415 million, or 45 cents per share, a 17.89 percent rise from a year earlier. Annual revenue grew 4.95 percent, to $9.74 billion.

The hotel industry, which suffered great losses during the recession, has rebounded in recent years. Analysts say strong demand has helped push up occupancy rates and average daily prices.“The results were quite strong ,” said Amit Kapoor, a lodging analyst for Gabelli & Co. “Overall the lodging industry is in the middle of a very robust cycle.”

The past year has been one of great transition for the hotel giant, as it worked to pay down or refinance billions of dollars in debt.

“They have a much cleaner balance sheet now,” said Smedes Rose, an analyst for Evercore Partners. “From an operational perspective, Hilton is a juggernaut on the go.”

Last year, Hilton added 34,000 rooms. Revenue per available room, a key industry measure, rose 4.7 percent in the fourth quarter, to $93.76; much of that growth came from hotels in Asia.

In 2014, Hilton expects revenue per available room to increase between 5 and 7 percent as it ramps up its presence in China. Much of that growth, Nassetta said, will come from the company’s mid-tier hotels, such as Hilton Garden Inn, Hampton Inn & Suites, and Embassy Suites.

“Long term, I’m very optimistic about the development opportunities in China,” Nassetta said in a call with investors. “In the short to medium term, I’m pretty darn optimistic as well.”

Abha Bhattarai covers local retail, hospitality and banking for The Washington Post. She has previously written for The New York Times, The Wall Street Journal, Reuters and the St. Petersburg (Fla.) Times.
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