Hilton lost $432M in Q2 2020 but says occupancy now recovering in most markets

Hilton lost $432 million and RevPAR (revenue per available room) dropped 81% to $21.67 in the second quarter of 2020 as the COVID-19 virus crushed travel around the world. For comparison, in the second quarter of 2019 Hilton had income of $261 million.

Hilton reports adjusted EBITDA in the second quarter of $51 million, compared to $618 million in the second quarter of 2019 – a drop of 92%.

The company felt the most significant negative impact in the April – the first month of the quarter – and in a call with analysts to discuss the results, president and CEO Chris Nassetta says since then occupancy rates have begun to improve as hotels reopen. 

As of July 31, 96% of the company’s 6,100 hotels are open around the world.

Occupancy levels were up about 20 percentage points in the United States and 15 percentage points in Asia between April and June.

System-wide occupancy was 22% in the second quarter but varied widely between markets – from a low of 7% in Europe to a high of 29% in Asia Pacific. The United States was second highest at 24%. For the first six months of the year, occupancy system-wide is nearly 40%.

“As you go into the fall what I would hope is that we’re going to be in that 45 to 50% range. You’ll see leisure trail off as you always do, but I think a little less so ... because a lot of kids aren’t going back to school or they are but virtually, a lot of offices aren’t opening up. So [people] have a lot more flexibility to sort of extend the leisure travel season. And we can already see early telltale signs of that,” Nassetta says.

“And then it will be a grind up. Because as you get through the health elements of this crisis, you’re going to be dealing with an economic crisis or a recessionary environment, and businesses and individuals have been impacted.”

Nassetta says he expects it will be two to three years before Hilton’s business returns to the levels it had in 2018 and 2019. 

While the brand has seen some activity for group and business bookings, Nassetta says it is primarily small groups of people related to the crisis or groups that need to meet but do not have access to their office space.

Large group meetings, what he calls the traditional “bread and butter in the fall,” will be the slowest to recover.

“The core traditional group is going to kick forward to Q2 to Q4 of next year,” Nassetta says.

“We are booking new business, tens of millions of dollars a week for periods in the future, most of which is starting in the second quarter next year.”

While the majority of bookings have been coming from leisure travelers, Nassetta says the proportion of those coming through the online travel agencies has remained constant, and Hilton’s direct channels are growing at a faster pace. 

“That is because of our actions. Not so much what we are doing with the OTAs, but very much our spending our marketing dollars and how we are orienting our Honors program to access that type of customer,” he says.  

Regarding future growth, the company says it has more than 2,700 hotels consisting of nearly 414,000 rooms in development, with more than half of those rooms outside the United States, including 35 locations where Hilton does not currently have open hotels. 

Nassetta opened the call by referencing the “tragic acts of social injustice” that took place in the U.S. during the second quarter, “leading to difficult but necessary discussions regarding systemic inequalities.”

“Now more than ever Hilton remains committed to fostering an inclusive culture and driving positive change in our communities and society more broadly. Building on the work we have been doing, we have set even more aggressive leadership diversity targets across corporate and hotel teams,” he says.