Hilton Expects to Stay on Target in Q3 Thanks to China

Hilton Worldwide Holdings Inc. will release its third quarter 2018 financial results on Wednesday before the market opens. While the company’s financial results will not reflect the benefits of China’s record domestic and outbound travel figures for the National Day holiday, which will be recognized in the fourth quarter, it should see a boost in revenue from the end of the summer travel season.

The company opened its 100th hotel in China in earlier in the summer as well as its first Doubletree Resort in China in Hainan Province in September. It is looking to expand its luxury portfolio in the Asia-Pacific region to attract high-end Chinese travelers.

Hilton President and CEO Chris Nassetta went on CNBC’s “Managing Asia” last week and emphasized the importance of the China market to the hotel company. Nassetta said, “Same-store results are very strong in China. They lead the world for us.” He added, “Our unit growth this year in China will probably be up 50 percent, I expect. It’s up a similar amount next year.” He expects that building brand loyalty in China will help Hilton succeed with Chinese outbound tourists, thus boosting its earnings globally.

In an interview with Jing Daily in August, Daniel Welk, vice president of operations, luxury, and lifestyle of Hilton Asia Pacific, also stressed the importance of the China market. Welk noted that the company is working on connecting with customers through Chinese social media channels such as WeChat, and has even launched a mini-program on the app. In addition, the company hopes to benefit from its flagship store launched last year on Alibaba’s online travel agency Fliggy.

The outlook for Hilton is optimistic, according to company management. And some of that optimism stems from its China-related business.

During the Q2 2018 earnings call, CFO Kevin Jacobs said, “Revenue from international inbound travel also helped results, growing over eight percent in the quarter, due largely to increases from China, Europe, and Canada.”

Hilton has been leading in hotel construction in China this year, according to a report by hospitality industry magazine Hotel Management. Nassetta told CNBC, “[China] is way undersupplied in hotel rooms relative to the demand that’s in place and the demand that we anticipate over the coming decades.”

This year, shares of Hilton hit a high of $87.69 on January 22 but dipped a further 1.8 percent on Tuesday to close at $68.87, still above its 52-week low of $66.87. Reuters has the consensus EPS estimate for Q3 at $0.71.

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