Hilton Q2 Result: $432M In Red & 250 Hotels Still Closed

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Hilton today announced its second-quarter (April, May & June) results, and they were as ugly as one could expect in the current environment.

The hotel company lost $432 during the quarter and, as of July 31, roughly 250 hotels (4%) were still closed.

You can access Hilton here.

READ MORE: Hilton Honors Rate & Bonus Points And Miles Promotions

I find it very disturbing that Hilton “reports” and adjusted EBITDA (earnings before anything) of positive $51M when the actual result is a net loss of $432. Where did half a billion disappear?

Here are three slides that could be of interest for our readers:

Occupancy is especially ugly in Europe and the Americas (excluding the US). The average daily rates are down by 30% to 40% across all regions.

Interestingly, Conrad hotels did lots of discounting as their ADR is off close to 50%. The select-service brands had much better (low anyway) occupancy rates compared to full service/luxury, and their ADR drop wasn’t as bad.

It is always fascinating to see the number of hotels under various Hilton brands and their geographical distribution.

Here’s the statement from Hilton:

Hilton Worldwide Holdings Inc. (“Hilton” or the “Company”) (NYSE: HLT) today reported its second quarter 2020 results. The following results reflect the material impact that the novel coronavirus (“COVID-19”) pandemic had on Hilton’s business. Highlights include:

  • Diluted EPS was $(1.55) for the second quarter, and diluted EPS, adjusted for special items, was $(0.61)
  • Net loss was $432 million for the second quarter
  • Adjusted EBITDA was $51 million for the second quarter
  • System-wide comparable RevPAR decreased 81.0 percent on a currency neutral basis for the second quarter from the same period in 2019
  • Approved 18,400 new rooms for development during the second quarter, growing Hilton’s development pipeline to 414,000 rooms as of June 30, 2020, representing 11 percent growth from June 30, 2019
  • Opened 6,800 rooms in the second quarter, contributing to 5,500 net additional rooms in Hilton’s system
  • As of July 31, 2020, 96 percent of Hilton’s system-wide hotels were open
  • Launched Hilton CleanStay, a new program created in collaboration with RB, maker of Lysol and Dettol, and Mayo Clinic, to deliver an elevated standard of cleanliness and disinfection to properties worldwide, and Hilton EventReady, which focuses on cleanliness and customer service specific to meetings and events
  • Announced a new strategic partnership with Country Garden to develop 1,000 Home2 Suites by Hilton in China, representing the first major extended stay offering for Hilton outside of North America

And full financial release:

Download (PDF, 898KB)

Conclusion

Hilton is $10B+ in debt and pays roughly 4% interest. The interest expense thus is roughly $100M per quarter. If Hilton is not able to turn around fast, this could become a problem. The hotel company has cash on hand to operate for two years at the current burn rate that certainly will improve in 2021 if not by the final quarter of this year.

There are 2,700 hotels under development (would be interesting to know the breakdown by brand), of which some may or may not materialize in these challenging times (most likely will go ahead). It is unclear how many hotels will not open, will reflag, or go independent due to the current trading environment.

I don’t think that we will have visibility before 2021 how this Covid-19 will play out with hospitality sector companies.

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