Hilton Worldwide Holdings Inc. Q4 FY2025 earnings call

Management Statement and Operational Highlights

• 2025 Achievements: Expanded brand portfolio, pipeline reached record level, strengthened Hilton Honors loyalty system. Opened nearly 200 hotels in Q4 and 100,000 rooms full year. Reached 9,000 hotels globally, 44 brand country debuts, and opened first properties in new markets like Tanzania, Rwanda, etc. Luxury lifestyle brands expanded, conversions accounted for ~40% of room openings. Launched Apartment Collection by Hilton and Outset Collection. Pipeline surpassed 520,000 rooms. Hilton Honors program near 125 million members. Named number one world's best workplace and multiple brand recognitions.
• Development: Full-year net unit growth 6.7%, pipeline over 520,000 rooms. New development construction starts in U.S. up over 25% in 2025, expected to accelerate in 2026 with global starts up over 20%.

Segment Performance

• Full Year 2025: System-wide RevPAR growth was up 40 basis points year over year, driven by strong performance in EMEA and growth in group and leisure transient. Adjusted EBITDA reached $3.7 billion, up 9% year over year. Returned $3.3 billion to shareholders.
• Fourth Quarter 2025: System-wide RevPAR increased 50 basis points year over year. Leisure transient RevPAR was up 2.3%, business transient RevPAR down 2.1%, group RevPAR up 2.6%. System-wide RevPAR was strongest in December, up 1.7%.
• Regional Performance: Fourth quarter comparable U.S. RevPAR decreased 1% due to business transient and group pressure. The Americas outside the U.S. saw RevPAR up 3.8%, Europe up 5.3%, MEA up 15.9%, APAC ex-China up 9.2% while China’s RevPAR declined 1.4%. For full year 2026, U.S. RevPAR growth is expected towards the low end of system-wide guidance, Americas ex-US low single-digit growth, Europe low single-digit, MEA mid-single-digit, and APAC low single-digit with China roughly flat.
• Q1 2026 Expectation: System-wide RevPAR growth expected to be between 1-2% year over year.

Guidance

• Q1 2026: System-wide RevPAR growth expected between 1-2%. Adjusted EBITDA expected between $875 million and $895 million. Diluted EPS adjusted for special items expected between $1.91 and $1.97.
• Full Year 2026: System-wide RevPAR growth expected 1-2%. Adjusted EBITDA expected between $4 billion and $4.04 billion. Diluted EPS adjusted for special items expected between $8.65 and $8.77. Expect net unit growth of 6-7% for 2026 and beyond. Expect to return approximately $3.5 billion to shareholders in 2026 via buybacks and dividends.

Risks

• Actual results could differ materially from forward-looking statements. Factors causing differences include those in the Risk Factors section of the most recently filed Form 10-Ks. Macro-economic conditions, government actions, competition, and other operational factors could impact results.

Question and Answer Q: Good morning everyone. Thanks for taking my question. Chris, like, would love to start with you both in the prepared remarks and overall sound a bit more optimistic. So we always value your kind of overview of where we kind of sit with the broader economy and the lodging industry. If you could just kind of give us your kind of latest thinking there and maybe specifically, a few thoughts around the business transient environment, particularly large versus small corporate. I think on the small or medium size, we've seen some weakness. Wondering what you think about that as we kinda turn the page into 2026.

A: Yep. Great question. And, obviously, probably what's the number one thing on everybody's mind. So a lot of this I covered on our last call and as I've talked to individual investors, you know, have shared these thoughts. But you know, if you think back about what I said, you know, on the third quarter call, I was reasonably optimistic about '25, you know, being a decent year, but '26 and, frankly, beyond, you know, at least for the next couple years. Being better. And my underpinning of that, which you know, I still believe is that you have some macro forces and some micro forces that are converging in a really positive way. Number one, being, you know, inflation does structurally continue to come down. If you really factored for the lag effect of the housing input, is over 30% of the contribution to the inflation numbers and you factor for what it is real time, would argue it's actually lower than, you know, than is being reported. So that's a good trend. What does that mean? That means expectation which I believe that rates will continue to come down, which will be stimulative and positive in a bunch of ways. You see it this week and broadly, you know, you're in, you know, a very big deregulatory environment under, you know, in The United States under this administration, which is obviously I think, real positive in a bunch of different ways, whether that's financial services, energy, AI, you know, basic and infrastructure, reshoring, you know, there is a massive amount of that is going on. You have fixed tax policy that got done last year that is just you know, that is super business favorable and investment favorable and, you know, you expect to see that start to benefit. And then a massive investment cycle, the obvious being like the AI complex, just the major tech companies in the last two weeks alone, I think, when I finished adding it up, they are going to spend this year $700 billion. So let's just say there's gonna be a lot more than a trillion dollars spent on that. In you know, by that complex all of the energy that goes along with it, all you know, everything around the AI complex, I think, is huge. But then the other things going on more quietly are reshoring, whether that's in rare earth minerals and pharma, chips, all of that stuff is going on. I mean, the chips act that got passed during the Biden administration, very little of that money has been spent. And then you have core infrastructure where we approve, you know, congress approved $1.6 trillion when you add up all the pieces. Again, a very small part of which has been invested at this point. When I talked in the third quarter, I said like, intellectually, it's really hard for me not to be you know, when I lift up above the noise of day to day politics to not feel like those things are gonna be really good for the economy and it's undeniable. But at the same time, I said, you know, I don't know exactly when it's gonna come, And at that point, we were not seeing a whole lot of evidence that that that was sort of seeping into the economy. Although I was very confident, as you remember, that that it would. By the way, the other thing going on is we're at the beginning of one of the greatest productivity booms in American history with the, you know, the whole AI Once those investments get done and over the next several years of adoption, you have massive opportunities on productivity. My belief then and now was that we will have economic growth picking up, and most importantly, because it impacts our business, that it would be broader based economic growth. It would not be as much this K economy where the very high end, the very wealthy keep doing well, and the middle class and below continue to struggle to pay for groceries and gas and their utilities. But that you would start to ultimately because the middle class has to be involved to make all this happen, particularly the investment side that you would start to enter a world where you would see middle class real wage growth. By the way, I think right now, you're starting to see the first prints of middle class real wage growth. That means people have more disposable income, and they will be spending more money including on our products. When you really get down to it, the bulk of our system, I think everybody's system is more concentrated because the middle class is the biggest percentage of the population in the mid market. And so, That's what I thought last quarter That's what I think now. The only difference I would say, is that we're starting to see it. Now I'm gonna be really honest. That and it's obvious, so I should be honest, is the data set that I'm looking at are not you know, months and months, quarters and quarters. What I'm really looking at as I said a little bit, when we talked about December is the end of the year got got a lot better than we thought. Even with the storms, the beginning of this year has been better. And it's been better in the ways we'd want to see it. What does that mean? That means midscale, upper mid scale, You know, it means midweek, it needs it means business transient to your question, Shaun, we're seeing a meaningful change from what we were seeing earlier in the fourth quarter and certainly in the third quarter. Whether that's sustainable or not, I don't know. But it feels to me if all the other macro conditions that I was talking about, if those continue to develop it sort of has to be the beginning of a trend. By the way, the other thing it's not macro, it's micro, but I said micros, we have a bunch of like, benefits this year, which you guys are aware of. Number one, the comps is said, are easier because I mean, you could have other things happen, but liberation day was a pretty big deal and the biggest government shutdown in American history was a pretty big deal. You hopefully don't repeat those at that, you know, at that scale. And we have a bunch of unique events, which you're well aware of, with the World Cup, America's 250, that are really stimulative to travel at the same time all these other things are going on. And so you know, I you know, I have you know, we're at the beginning, I think of a trend. We have to get more data, you know, and, like, see it really sort of continue. But I I like what I'm seeing right now. And and as a result, you saw in our guidance that we think that 26%, as I had thought last quarter, will be a lot better than than 25. And I think we have very solid underpinnings to back that up. In the first quarter, by the way, in the guidance we're giving, super solid. At this point, we're halfway through the quarter. We have very very good sight lines into the rest of February and even into March, and it feels that it feels good in all the ways I just described. So that's the reason for my increased optimism is data. That I'm actually able to see data that says what I hoped and thought would happen is starting to happen and hopefully is sustainable.

Q: Hey, good morning, everyone. Thanks for taking my question. You touched on this a bit, but maybe in a different lens. The AI and technology front, I mean, this continues to obviously evolve at a very rapid pace. So I guess the question is, how close are you to maybe announcing some partnerships there, if that's on the horizon? And then how do you think about the opportunity here both from the OpEx side internally and then externally from the revenue side in terms of distribution.

A: Yeah. I mean, I talk we talked a lot about I think on the last call too and I suspect we'll be talking about this on every single call because, obviously, it's important. And as you can imagine, we're spending a huge amount of time on AI throughout our whole organization. And one of the things that I believe gives us a meaningful competitive advantage is that we have a modern tech stack. And relative to our competitive environment, I don't think anybody can claim what we can claim. And what is that? Well, you know, it's not me just patting my chest. It affords us much greater flexibility and agility to adopt AI in a bunch of really interesting ways. And so you can imagine we're exploring all those. As I said last time, there's sort of three big buckets of things. The first is just like creating efficiencies in the system. Some of that could benefit G and A. By the way, you've seen some of the benefits. I mean, G and A is lower than it was six seven years ago, and that's not all AI, but part of it is process reimagination, making ourselves better, applying the use of technology in ways been doing that forever, and AI is just another amazing tool that allows us to speed some of that up. And so we're looking at tons of things, like, you know, hotel openings is the one that we our teams are deep in the middle of. Like, you know, so many people touch you know, the process of opening a hotel, dozens and dozens, like, you know, creating, you know, massive efficiency around connecting all those dots. And we have dozens of other use cases in that area. And then there's the whole distribution space, which is the crux of your question. We tend not to make big announcements until we've done things. We're working with many of all the big players out there, the OpenAI, the jet, you know, Google. We're working with all of them. We're part you know, not not but the big ones that are big in the travel or trying to either are or trying to be. We're involved in all of their tests and, you know, we're developing the connectivity with those platforms, and I'm super optimistic about that. We're also because we have a very modern tech stack, doing some really interesting things in sorta natural search connected to booking and the experience within our own platforms some of which you'll start to see, you know, at some point in second quarter, which I think are really cool. My own view on the distribution space is quite I said, probably said this last time is simple. Like, we believe we have the best products, deliver the best service with the best culture. Our loyalty that continues to be super relevant, and the customers want what we do because we're good at it. We do a good job. Like, if you look at the hard data, market share, review site index, we perform really well. Customers wanna find us. We believe what's going on with AI is spectacular. There's always risk, by the way. You know, like, not don't have my head in the sand nor does anybody here. But I think in our space, which is very hard to disintermediate because it's physical business, The opportunities are far greater, both in distribution and otherwise than the risks are. And why? Because if we keep doing a really good job the way we do it and customers want our stuff, they're gonna be able to find our stuff in what will be frankly a more competitive environment that we've seen heretofore. They'll be able to find it in a way that's easier with less friction and that's more efficient. And so my belief is this is a pathway to lower distribution costs broadly, for our owner community if we're smart, never forgetting that the one thing at our scale, I mean, look at The US alone, we're 13 plus percent of the market, If you look at the quality market, no offense to the whole market, we're probably well over 20% of the market. We have complete control over rate, inventory, pricing, availability, and if we don't want to share it, nobody can get it and we have products that people want. I view that as super valuable. So as we think about how we engage with everybody in this space, and we are, as I said, already engaged in all the ways you would think with the big players I think it's a very symbiotic relationship. I think customers, for them to have platforms that are in travel, they sort of need our product and for us to show up we want to work with them. Think it's quite a balanced equation, as I said. I think the net result is generally good on distribution cost. The last bucket I talked about, which is super exciting and we're doing a bunch of stuff, is just the whole customer experience. I mean, so I talked a little bit about, like, the dreaming function in our own systems, a being able to not just dream and you know, sort of natural search and AI enabled, but then, you know, have it be seamless to booking, have it then be seamless to pre-arrival and planning your stay, on property experience problem resolution, post stay, you think about with the use of AI, the data, the tools that we already have and that we're building out in a much more fulsome way with a fully modern tech stack that we can put so much where we have an experience with our customers that is digital with AI and with our platform, we can really revolutionize how customers interact with us. And then we're at the physical side of it, we have the ability to create tools and we are doing it that enable our teams to have so much more information for people to plan their stay, on property, problem resolution, etcetera. That I think it's really, really game-changing. And we've been, I'm not gonna get into everything we're doing. Obviously, it's competitively set. But we're doing a whole bunch of stuff. We have I don't know, 40 use cases plus and growing, in all of those buckets around AI working with a bunch of great partners, many of the names that you read about. In the news every single day and have super close engagement. And I feel really listen. They were in the early days of AI, like, you know, for sure. But I feel like we're in a really good position based on the platform, the efforts we're making, yeah, and progress we're making as this evolves.