Hilton Reports Strong Third-Quarter Results
Comparable U.S. Owned-or-Operated RevPAR Increases 10.1%; Hilton-brand Owned-or-Operated RevPAR up 13.4%; Recurring EPS $.16 vs. $.15
BEVERLY HILLS, Calif.--(BUSINESS WIRE)--Oct. 25, 2000-- Hilton Hotels Corp. (NYSE:HLT - news) today reported results for the third quarter and nine months ended Sept. 30, 2000.
Strong results in the third quarter were highlighted by double-digit increases in revenue-per-available-room (RevPAR) at the company's U.S. owned-or-operated hotels and its Hilton-brand owned hotels, as well as total earnings before interest, taxes, depreciation, amortization and non-cash items (EBITDA).
Financial information for 1999 is presented on a pro forma basis as if the company's acquisition of Promus Hotel Corp. had occurred on Jan. 1, 1999.
On a recurring basis, Hilton reported net income for the third quarter of $60 million, compared to $55 million for the same period a year ago. Recurring diluted net income per share was $.16 vs. $.15 in the corresponding 1999 quarter.
Third-quarter 2000 was impacted by a one-time pre-tax gain of $3 million -- or roughly $.01 per share -- resulting from the sale of certain securities. The 1999 quarter was impacted by a net pre-tax gain on asset dispositions of $27 million, resulting primarily from the sale by Promus of select hotel properties, as well as $1 million in non-recurring charges also recorded by Promus. The impact on the 1999 pro forma third quarter totaled $.04 per share.
Including these non-recurring items, Hilton's third-quarter net income was $62 million, compared to $72 million in the 1999 period, while net income per share was $.17 vs. $.19 a year ago.
Comparable RevPAR at the company's U.S. owned-or-operated hotels increased 10.1 percent during the quarter. This gain was the result of a 2.4-point occupancy gain to 76.9 percent, coupled with an average daily rate (ADR) improvement of 6.7 percent to $130.59.
Comparable owned-or-operated RevPAR within the Hilton full-service brand portfolio increased 13.4 percent in the quarter. Occupancy rose 4.3 points to 80.0 percent, while ADR increased 7.2 percent to $161.63.
The Doubletree brand continued its rebound with comparable owned-or-operated RevPAR up 8.2 percent in the quarter, resulting from a 1.6-point increase in occupancy to 74.5 percent, and a 5.8 percent ADR increase to $110.69.
The company reported an 11 percent increase in third-quarter revenue to $867 million, from $784 million in the same quarter a year ago. Total EBITDA increased $37 million, or 13 percent, in the third quarter to $317 million. The increases in revenue and EBITDA reflect the aforementioned strong RevPAR gains as well as the benefit of 1999 acquisitions and new hotel openings.
Partially offsetting these increases, however, were lower group cancellation fees, a decline in purchasing and service fees, increased rent expense at the company's leased hotels and lower operating results from managed operations in Windsor. Additionally, the 1999 period includes revenue and EBITDA from owned Homewood Suites and Hampton Inn hotels that were subsequently sold late in the third quarter and in the fourth quarter that year.
Across all brands, EBITDA from the company's owned hotels in the third quarter totaled $209 million, with comparable EBITDA up 18.9 percent. RevPAR from comparable owned properties improved 11.3 percent. Owned property comparable EBITDA margins remained the strongest in the industry, improving 2.2 points to 34.4 percent.
A record summer travel season, continued high demand for hotel rooms in many major U.S. cities and limited new competitive supply in markets where Hilton has a major ownership presence all contributed to the company's strong RevPAR increases.
Particularly strong performances within the Hilton brand owned portfolio -- including many double-digit RevPAR and/or EBITDA gains -- were reported at the company's hotels in New York, San Francisco, Chicago, San Diego and Honolulu.
Hilton's new hotel at Boston's Logan Airport, which opened in September 1999, exceeded its third-quarter EBITDA budget by some $2 million, and the company's hotel in Alexandria, Va. -- acquired in February 1999 -- achieved major gains in both RevPAR and EBITDA.
Strong RevPAR gains at owned Doubletree hotels in Santa Barbara and San Jose, Calif., contributed to that brand's continued improvement, along with the impact of the Hilton HHonors guest loyalty program, cross-selling initiatives and national sales effort.
Management and franchise fees (across all brands) increased 10 percent to $89 million in the third quarter, attributable to increased RevPAR at comparable properties, and unit growth at virtually all brands, especially the Hilton Garden Inn and Hampton Inn brands.
Brand Development
During the third quarter, Hilton added 42 hotels and 5,131 rooms to its system as follows: Hampton Inn (30 hotels, 3,005 rooms); Hilton Garden Inn (5 hotels, 621 rooms); Doubletree (3 hotels, 519 rooms); Hilton (2 hotels, 716 rooms); and Red Lion (2 hotels, 270 rooms). Two properties and 283 rooms were removed from the system during the quarter.
Year-to-date the company has added 136 hotels and 18,630 rooms to its system, while 21 hotels and 4,280 rooms were removed from the system, with most of the removals occurring during the first half of 2000. At Sept. 30, 2000, the Hilton system consisted of 1,867 hotels with 314,629 rooms.
The company remains on track to open more than 180 hotels in calendar 2000, and approximately 400 in the next two years, and reaffirmed its confidence in achieving its annual unit growth target of 8 to 10 percent for the next three to four years. Year-to-date, the company has approved deals for more than 170 new hotels (with 22,000 rooms), and expects to approve more than 220 (with 27,000 rooms) for the full year.
According to data from Smith Travel Research, Hilton currently leads all lodging companies in the number of hotel openings in the midscale and upscale segments of the industry.
Hilton Grand Vacations, the company's vacation ownership business, reported continued strong overall sales. Sales at the company's newest timeshare property, a 275-unit facility at the Hilton Hawaiian Village in Honolulu, are exceeding expectations. The property is scheduled to open early next year and the company will begin recognizing the income from these sales in early 2001.
Systemwide Brand Performance
Strong RevPAR gains were reported in the third quarter across all of the Hilton family of brands, including owned, managed, leased, joint venture and franchised properties. Across the Hilton brand, third-quarter RevPAR increased 11.3 percent; Hilton Garden Inn, 11.0 percent; Doubletree, 8.3 percent; Embassy Suites, 7.8 percent; Homewood Suites by Hilton, 4.6 percent; and Hampton Inn, 4.0 percent.
These gains reflect the impact of Hilton's HHonors program, cross-selling and other marketing initiatives, and a major increase in summer travel throughout the United States.
Nine-Month Results
For the nine-month period ended Sept. 30, 2000, Hilton reported net income of $190 million on a recurring basis, compared to $181 million pro forma for the same period a year ago, an increase of 5 percent. Recurring diluted net income per share rose 4 percent for the nine months to $.51, from $.49 pro forma in 1999.
Including non-recurring items, nine-month net income increased 9 percent to $208 million, from $191 million pro forma in the 1999 period, while net income per share rose 10 percent to $.56, compared with $.51 pro forma for the 1999 period.
RevPAR at the company's comparable U.S. owned-or-operated hotels increased 7.7 percent for the nine months, with occupancy improving 2.0 points to 75.0 percent, and ADR showing a 4.8 percent increase to $131.68. Total company EBITDA rose 13 percent to $958 million, from $848 million pro forma for the nine-month period in 1999.
Marketing Initiatives/Synergies
Stays related to Hilton's industry-leading HHonors loyalty program -- introduced April 3, 2000, to the Hampton Inn, Doubletree, Embassy Suites and Homewood Suites by Hilton brands -- accounted for 20 percent of the total stays at those four brands as of Sept. 30, an increase from 15 percent at the end of the second quarter. Hilton HHonors continues to experience significant enrollment activity, and expects membership of some 11 million by year-end 2000.
Cross-selling efforts among all of the brands in the Hilton portfolio continued their upward trend during the third quarter, averaging approximately $7 million per month in incremental systemwide booked revenue. The consolidation of the company's reservation system -- expected to further enhance generation of incremental revenue from cross-selling -- is on track for completion by year-end.
Additionally, bookings have been accelerated into many of the former Promus brands by the company's 300-person worldwide sales force, the benefit of which will be realized more fully beginning in 2001.
These initiatives, coupled with the realization of cost-saving synergies from the Promus transaction, have the company on target to achieve its recently revised 2000 synergy goal of $65 million from the Promus acquisition.
Corporate Finance
During the quarter, the company completed a $500 million mortgage loan with a term of 10 years and bearing interest of 7.95 percent per annum. Secured by first mortgage interests in five Hilton properties, the loan proceeds were used to pay down the company's floating rate debt.
Additionally, the company announced Oct. 18 that it had extended the term of its $1.145 billion Senior Unsecured Revolving Credit facility until Oct. 18, 2003, and renewed its 364-day Senior Unsecured Revolving Credit Facility. The 364-day facility was reduced to $400 million (from $450 million) and remains undrawn.
``With Americans and international visitors traveling in record numbers and the lodging business well on its way to yet another great year, our hotels experienced a fabulous summer season, borne out by the very strong RevPAR numbers reported by our major-market owned hotels and across all of our brands,'' said Stephen F. Bollenbach, president and chief executive officer.
Bollenbach continued: ``We continued in the third quarter to show very positive results against each of the three priorities we set for 2000. In terms of maximizing the return on our owned assets, we delivered double-digit RevPAR increases at those hotels and continued to post the best margins in the business. On the brand development side of our company, we are achieving our unit growth goals and leading the industry in the number of openings in the segments in which we compete. And finally, we are firmly on track to hit our recently upward-revised synergy numbers from the Promus acquisition.
``All of this adds up to what was a very successful third quarter and year-to-date, and we look forward to continued positive results for the remainder of this year,'' Bollenbach said. |
