Hilton: Industry Won't Return to Pre-Covid Levels Anytime Soon
Hilton lost US$432 million in the second quarter, and occupancy rates began to lift from dismal lows as hotels reopen and coronavirus restrictions were lifted around the world.
After hitting 13 per cent in mid-April, global hotel occupancy is now running around 45 per cent, Hilton President and CEO Christopher Nassetta said during a conference call Thursday with investors.
"While those are still terrible numbers, that is a lot of improvement over a relatively short period of time," he said.
Nassetta expects occupancy to climb to the 50 per cent range this fall, but also that it will take business travel two to three years to recover.
The hotel may get a boost from an extended leisure travel season because kids may not be in school and work is more flexible right now, Nassetta said. Some colleges are also booking hotel rooms to expand dorm capacity, he said, while workers are booking rooms to serve as remote offices.
In the April-June period, occupancy averaged 22 per cent worldwide, down 56 per cent from the same period a year ago. Occupancy levels were highest in Asia, at 29 per cent, and lowest in Europe, at 7 per cent.
U.S. occupancy levels averaged 24 per cent. Tourism in beach towns like Norfolk, Virginia, has recovered more quickly in the U.S. than cities like New York and Seattle, according to STR, a hospitality data and consulting firm.
The McLean, Virginia, company announced layoffs of about 2,100 people, 22 per cent of its corporate workforce, in June, and it extended previously announced furloughs and corporate pay cuts for 90 days.
The adjusted loss of 61 cents per share was far worse than the 31 cents projected on Wall Street, according to a survey of analysts by FactSet.
Hilton's revenue plunged 77 per cent to US$564 million in the April-June period. Analysts had expected sales of US$819 million.
Revenue per available room, a key measure, plunged 81 per cent to US$21.67. One issue: Business is stronger at lower-priced brands like Hampton and Hilton Garden Inn than more expensive properties like Waldorf Astoria hotels.
That will eventually change, Nassetta said, but for now there is pressure on pricing.
"People are going to expect a bargain for everything," he said.
The coronavirus pandemic has had a devastating effect on the hotel industry. A fifth of Hilton's hotels had to close at some point in the last six months, Nassetta said. As of July 31, 96 per cent of its 6,100 hotels were open worldwide.
To entice travellers, Hilton recently launched CleanStay, a cleaning program it developed with Lysol and the Mayo Clinic.
Hilton shares were flat Thursday.