Hilton Worldwide Holdings Inc. Q3 FY2025 earnings call

• Business resilience: Third quarter results demonstrate business resilience with strong net unit growth, disciplined cost control, and capital-light model delivering solid bottom-line performance. Adjusted EBITDA and adjusted EPS exceeded expectations despite softer industry RevPAR performance. - RevPAR performance: System-wide RevPAR down 1% year over year in Q3 due to various factors; leisure transient RevPAR roughly flat, business transient RevPAR down 1%, group RevPAR down 4% but group demand strengthened. - Development: Opened 199 hotels with over 24,000 rooms in Q3, net unit growth 6.5%, organic openings up over 35%. Luxury and lifestyle brands comprise ~20% of Q3 openings. Announced plans in Asia Pacific to exceed 250 luxury and lifestyle hotels, opened Conrad Hamburg in Europe. Conversions integral, nearly 40% of 2025 openings to be conversions. Launched new brand Outset Collection by Hilton. Signed 33,000 rooms in Q3, development pipeline over 515,000 rooms. - Technology and culture: Proprietary tech platform with 90% enterprise solutions in cloud, positioned to embrace AI. Named number one best workplace in Australia, New Zealand, and Sri Lanka.

System-wide RevPAR decreased 1.1% year over year in the third quarter on a comparable and currency-neutral basis. Regionally, third-quarter comparable U.S. RevPAR decreased 2.3%; The Americas outside the U.S. RevPAR increased 4.3%; Europe RevPAR grew 1%; Middle East and Africa region RevPAR increased 9.9%; Asia Pacific region excluding China RevPAR was up 3.8%, while China RevPAR declined 3.1%. For the fourth quarter, system-wide RevPAR is expected to be up approximately 1%. For the full year, RevPAR is expected to be flat to up 1%. Adjusted EBITDA was $976 million in the third quarter, up 8% year over year. Diluted earnings per share adjusted for special items was $2.11 in the third quarter.

• Fourth quarter: Expected system-wide RevPAR growth ~1%, adjusted EBITDA between $906 million and $936 million, diluted EPS for special items between $1.94 and $2.03. - Full year: Expected RevPAR growth 0% to 1%, adjusted EBITDA between $3.685 billion and $3.715 billion, diluted EPS adjusted for special items between $7.97 and $8.06. Full year expected to return approximately $3.3 billion to shareholders in the form of buybacks and dividends.

• Actual results could differ materially from forward-looking statements, refer to Risk Factors section of most recently filed Form 10-Ks. - Government shutdown may impact forecast, as factored into fourth quarter and full year scenarios but still affecting numbers.

Q: Shaun Kelley asked about the timeline for top line improvement and cost control if top line doesn't improve.

A: Christopher Nassetta responded discussing the better setup for 2026 with factors like inflation coming down, rates coming down, certainty on tax policy, investment cycle, and comps getting easier, also emphasizing continued cost discipline and using AI to drive efficiencies.

Q: Stephen Grambling asked about partnering with large language models and internal AI efforts.

A: Christopher Nassetta responded talking about three buckets of AI use: reinventing processes for efficiencies, go to market distribution, and customer experience, with focus on fulfillment, distribution, and customizing customer experience.

Q: Daniel Brian Politzer asked about parsing net unit growth between conversions and new brands.

A: Kevin Jacobs responded stating the acceleration in net unit growth is broad-based, nearly 40% from conversions, new development starts up, and new brands part of the story.

Q: David Brian Katz asked about balancing tangible and intangible return in luxury.

A: Christopher Nassetta responded stating luxury is important for halo effect, focused on it, but expecting relative performance gap to close with broader economic growth.

Q: Steven Donald Pizzella asked about the genesis of fee reductions for owners and impact on franchise and royalty fees.

A: Christopher Nassetta responded stating genesis was to help owners and encourage investment, no impact on royalty and license fees, and it incentivizes conversions.

Q: Robin Margaret Farley asked about fee revenue per room and economics.

A: Kevin Jacobs and Christopher Nassetta responded stating no unusual comps, mix shift not shifting overall contribution, and fees per room continuing to grow.

Q: Brandt Antoine Montour asked about corporate travel trends and what corporates are waiting for.

A: Christopher Nassetta responded stating people are constructive, noise in system has been holding them up, but expecting more confidence and travel next year.

Q: Elizabeth Dove asked about key money side.

A: Kevin Jacobs responded stating it's a more competitive environment but not dramatically changing, still mostly deals with no key money, and a good run rate for key money.

Q: Michael Joseph Bellisario asked about pricing and booking.

A: Christopher Nassetta responded stating rate integrity reasonably good, mix shift affecting rate, with leisure substituting for business transient.

Q: Smedes Rose asked about government shutdown impacting forecast.

A: Kevin Jacobs responded stating government shutdown factored into forecast and affecting numbers but within full year range.