Hilton Sells $1B Worth Of Honors Points To American Express & Thousand Hotels Closed

Airlines are known to sell points to their credit card partners during  cash crunch, and both Delta and United were reportedly considering doing so this week (read more here).

Hilton issued an SEC filing today due to a debt issuance that had some interesting information about their current hotel closures and that the hotel company had pre-sold American Express $1,000,000,000 worth of Honors points.

You can access Hilton here.

READ MORE: Hilton Honors Rate & Bonus Points Promotions

Hotel suspensions

• 12% of the Americas hotels are closed
• 60% of the hotels in Europe, the Middle East, and Africa are closed
• 15% of the Asia-Pacific hotels are closed

Here’s interesting information:

As of April 14, 2020, we were experiencing suspensions of hotel operations at nearly 1,000 hotels, or approximately 16% of our global hotel properties. Regionally, approximately 12% of our hotels in the Americas, 60% of our hotels in Europe, Middle East and Africa (“EMEA”) and 15% of our hotels in Asia Pacific have temporarily suspended operations as of such date. The first of these closures commenced in late January 2020, and we are not able to estimate the date that these suspensions of hotel operations will be lifted. Based on the trends described above, we currently estimate our system-wide comparable revenue per available room (“RevPAR”)(1) for the three months ended March 31, 2020 to have declined between 22% and 24%, on a currency neutral basis, when compared to the three months ended March 31, 2019.

Our Asia Pacific region experienced the effects of the COVID-19 pandemic in January, which continued into February and March, while more pronounced negative results in the Americas and EMEA regions only began in March. Currently, occupancy rates are approximately 17% for the Americas region and approximately 13% for the EMEA region. We have seen early signs of recovery in the Asia Pacific region, particularly in China, with current occupancy of approximately 22%, up from approximately 9% in early February and with over 130 of the nearly 150 hotels in China that had previously suspended operations having re-opened.

Honors Points Pre-sale

In April 2020, we pre-sold Hilton Honors points to American Express for $1.0 billion in cash. American Express and their respective designees may use the points in connection with the Hilton Honors co-branded credit cards and for promotions, rewards and incentive programs or certain other activities as they may establish or engage in from time to time. We will use the proceeds from the Hilton Honors points sale for working capital, general corporate and other purposes.

Conclusion

Hilton had to sell these points at a significant discount to American Express for the deal to make sense for the credit card company. I would estimate that the sale price was somewhere around 0.2 – 0.3 cents each range. American Express likely bought 500 billion points.

Systemwide RevPAR (Revenue per Available Room) is down close to 60%, and more hotels are suspending their operations this quarter due to lockdowns, travel bans, and restrictions. Hilton’s revenue coming from the franchisees will be down 80% to 90%.