HLT Q1 Earnings Call: Revenue Misses Expectations, Non-GAAP Profit Outpaces Forecasts Amid Macro Uncertainty

May 12, 2025 at 14:26 PM EDT

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Hotel company Hilton (NYSE: HLT) fell short of the market’s revenue expectations in Q1 CY2025 as sales rose 4.7% year on year to $2.7 billion. Its non-GAAP profit of $1.72 per share was 7% above analysts’ consensus estimates.

Is now the time to buy HLT? Find out in our full research report (it’s free).

Hilton (HLT) Q1 CY2025 Highlights:

Revenue: $2.7 billion vs analyst estimates of $2.72 billion (4.7% year-on-year growth, 0.9% miss)
Adjusted EPS: $1.72 vs analyst estimates of $1.61 (7% beat)
Adjusted EBITDA: $795 million vs analyst estimates of $784.1 million (29.5% margin, 1.4% beat)
Management raised its full-year Adjusted EPS guidance to $7.85 at the midpoint, a 1.1% increase
EBITDA guidance for the full year is $3.68 billion at the midpoint, in line with analyst expectations
Operating Margin: 19.9%, in line with the same quarter last year
Free Cash Flow Margin: 16.1%, up from 12.8% in the same quarter last year
RevPAR: $103.59 at quarter end, in line with the same quarter last year
Market Capitalization: $57.76 billion

StockStory’s Take

Hilton’s Q1 results reflected macroeconomic headwinds, with management citing softer leisure demand impacting system-wide RevPAR growth, which came in at the low end of guidance. CEO Chris Nassetta noted strong group bookings and resilient small/medium business travel provided support, but leisure transient demand slowed as the quarter progressed due to economic caution. Nassetta stated, “Travelers are largely in a wait-and-see mode.” Looking ahead, Hilton raised its full-year non-GAAP EPS guidance but moderated RevPAR expectations, forecasting flat to 2% growth. Management expressed confidence in long-term growth via its asset-light model and expanding global pipeline, despite ongoing volatility. CFO Kevin Jacobs highlighted continued strength in development and non-RevPAR fees.

Key Insights from Management’s Remarks

Hilton’s management pointed to key segment and market dynamics that shaped the latest quarter’s outcome and influenced forward-looking guidance.

Group Travel Outperformed: Group bookings, particularly for company meetings and urban events, grew over 6% year-over-year, offsetting softness in leisure demand. Management reported that group business position is up mid-single digits, supporting near-term results despite some booking pace moderation.
Leisure Demand Softened: Leisure transient bookings saw a slowdown as the quarter advanced, mirroring heightened economic uncertainty. CEO Chris Nassetta cited travelers’ reluctance to commit, with short-term bookings flat year-over-year into Q2, indicating a 'wait-and-see' approach.
Robust Development Pipeline: Hilton opened 186 hotels in Q1 (over 20,000 rooms), achieving 7.2% net unit growth. International expansion was strong, with half of openings outside the U.S. and debuts in Greece, Africa, and Southeast Asia. The pipeline grew 7% YoY to over 503,000 rooms.
Conversions Drive Openings: Approximately 40% of new hotel additions were conversions, led by Doubletree and Spark brands. Management emphasized conversions become more attractive in uncertain environments, helping sustain momentum and reflecting owner desire for strong branding.
Non-RevPAR Fee Growth: Fees not tied directly to room revenue—such as credit card partnerships, purchasing, and HGV fees—outperformed internal expectations, contributing significantly to the non-GAAP profit beat. Jacobs indicated these streams would remain above algorithm for the year.

Drivers of Future Performance

Management’s outlook hinges on navigating macroeconomic uncertainty while leveraging Hilton’s growth model. Key drivers include expanding the development pipeline, which exceeds 500,000 rooms with nearly half under construction, and capitalizing on strong conversion activity, projected at 40% of openings this year. Stability in group bookings, expected to outperform transient, and resilient small-to-medium business travel are crucial, offsetting potential leisure softness. International growth remains a priority, focusing on Asia Pacific (especially Southeast Asia and India), Africa, and Latin America, where new brand entries and franchise agreements aim to boost fee revenue and diversify geographic presence. Continued growth in non-RevPAR fees from credit cards and other partnerships also supports the outlook, providing earnings stability independent of room demand fluctuations. Hilton aims for 6-7% net unit growth, reinforcing its asset-light expansion strategy.

Catalysts in Upcoming Quarters

In the coming quarters, the StockStory team will closely monitor (1) trends in RevPAR across leisure, group, and business travel segments, especially as macroeconomic volatility persists; (2) the pace of new hotel openings and the proportion of conversions versus new builds, as these signal development momentum; and (3) the trajectory of non-RevPAR fee streams, which are critical for profit stability. We will also assess progress in international markets and any shifts in booking patterns or consumer sentiment.

Hilton currently trades at a forward P/E ratio of 29.8×. Is the company at an inflection point that warrants a buy or sell? See for yourself in our free research report.

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