Hello there!
I am back after a significantly long break, and pumped up with extremely electrified neurons, bursting with new ideas for how I want this blog to go!
I am really excited to bring this as a part of my routine again. As always, my quick disclaimer here: This is NOT intended to provide any purchase/sell/hold recommendation for any financial instrument/product/virtual asset, nor am I qualified enough to provide investment advise. This will simply be an exerpt of my readings for the day, how I interpret the events this industry is currently experiencing, and what I think would be its key performing indicators.
This information is highly subjective and should only be read to gain some additional perspective into these sectors.
With that out of the way, let's begin on a new leaf...
THE HOSPITALITY INDUSTRY OF 2030
My day started off by reading McKinsey's article of what it thinks will be the future of the hospitality industry and what it will evolve into by 2030.
There were some very interesting and creative suggestions offered by the partners. The first among these was their anticpation that this industry will become highly flexible in the future.
ADMINISTRATIVE DELAYS AND VIRTUAL REALITY
Guests, especially in the higher end hotel rooms, shouldn't have to wait in long queues for check in but should rather be able to get the necessary smart keys/access cards etc directly into their phones which will help them avoid any administrative delays.
When they do reach their rooms it should be personalized to their tastes and preferences. This can be achieved by integrating virtual realities and AR into the hotel booking process,and through this customers can get an advanced immersive experience into what their hotel stay will look like. They can then customize this to suit their likes.
AUTOMATIC FURNITURE
Now imagine you going to such a hotel in 2030, to attend some critical client meetings. How incredible it would be if you could simply revamp the exact place you are sleeping in into a meeting room!
This was also one of the stipulations quoted by the consultants at McKinsey, who state that by 2030 automatic furnitures may become a reality and we could simply convert the furnitures in a given space into a meeting room, and once the discussions are completed, move around and adapt the furniture to once again become a room to relax in!
THE AMBIENCE GAME
There would also be a lot of focus that business would and will have to put to prioritize the well being of guests. They should play around with easily covertible ambiences, aesthetics etc in order to represent the location of their hotel, the state of mind of their guests at a specific point in time, the local celebrations etc in order to make the guests feel entirely involved in the hospitality.
SUSTAINABLE ACTIONS
There was also a great focus being placed on sustainability, as these consultants say that as a society more guests will be wanting to shift towards hotels that prioritize sustainability. Sensor technology would be used to identify the exact location and type of activity being performed by guests in a room and accordingly the lights/ventilation/heating of the room can be modified so that the guests are comfortable and at the same time, we are able to limit the consumption of the energy within the room.
TALENT ACQUISITION
The last section of the article focussed on talent acquisition in 2030. Since most of the people in the workforce at that time will be Gen Z it is important to understand their mindset so managers can better understand the art of getting work done through them.
There was one theory postulated that most Gen Z's have an alter ego, multiple versions of themselves that they'd like to portray to the world. This would require jobs to design recruitment programs in such a way that a single individual can assume multiple roles and responsibilities within the same organization, that are of varying natures, so that their workforce is able to deliver the maximum impact.
CONCLUSION
This report was in short, a good insight into what companies should be focussing on now to align with the trends of 2030 so they get a smooth transition into the future of their business!
HILTON WORLDWIDE INC - EARNINGS CALL Q1'25
I also spared some time to review Hilton's 2025 Q1 earnings call and it helped get a lot of insight into the macro economic factors that are currently shaping the hospitality industry.
Segment wise breakdown of the growth in RevPAR
SYSTEMWIDE REVENUE PER AVAILABLE ROOM
THE STRATEGY
On a systemwide basis, Hilton's revenue actually increased by 2.5%, which means that when we calculate the RevPAR of all the hotels that operate under the Hilton brand name (which includes both the hotels that are managed entirely by Hilton and the ones that are franchised), and compare it with the previous year, the RevPAR has grown by 2.5%.
The CFO later on went on to explain that this was actually at the lower end of their guidance range, but the growth was attributed to the increase in hotel room rates, which helped to combat the lowered occupancy.
This is again an interesting strategy to observe from a financial perspective. In the hotel industry there are a large variety of guests. Some of them are business owners, who most certainly cannot undermine the importance of staying in a good hotel. Some others are leisure travellers, who may not want to spend on hospitality when they perceive the economy to be in an uncertain state.
As a business, it is important to understand the pulse of your consumer base. By that I mean, it is important to understand when the occupancy rates from leisure would be low, and it cannot be changed through marketing/advertising etc. When such a time comes, it is wise to increase the room rates, since businesses would be far less reactive to pricing as compared to leisure travellers, in the hospitality sector.
Hence the company would stand a good chance of bolstering their revenue with limited occupancy. Similarly when a larger influx of leisure travellers are expected, discounts can be strategically advertised in order to attract more people to stay in the hotels.
THE MACRO ENVIRONMENT
The Q1 quarter consists of the Jan Feb and March quarters.
Since the previous month, December, marks the festive season, it carries with it a lot of momentum. Guests are willing to spend more on themselves, and work hours are also more relaxed. This momentum found its way into Jan and February where many guests were still willing to afford vacations and staycations.
However in the month of March, the Trump administration took charge and with that came a lot of political controversy and radical changes.
These changes ultimatley instilled a lot of uncertainity in the minds of the public, which could also be seen in the crash of the stock market. Hence short term booking became much lesser during this period and this trend is said to continue into Q2.
Is this really that bad?
Technically, no.
One of the analysts posed the question about a potential recession in America based upon the data from this quarter, however the CEO boldy denied the possibility of any highly adverse outcome.
As per the CEO the Trump administration is bringing up many big changes at once, and hence there is a lot of uncertainity and curiosity in the minds of people. However when there is a proper understanding of the government's intentions, people will settle down.
According to him, and this I found this particularly interesting, 'the market risk is weighted too heavily on the downside, i.e., everyone only wants to asusme the worst possible outcomes will happen, and hence the markets are (over)reacting according to these assumptions.
In reality the distribution of the possibilities are much more equally spread and hence there is a very good chance that Trump's policies might actually be able to improve the state of the economy in a big way.
Hence in the second half of the year, there may be a great cause of optimism, as uncertainity lifts and clarity resides.This wil help to encourage more leisure spending.
It is also worthy to note that a very lucrative holiday like Easter was pushed to April in 2025. That gap could be experienced in Q1 as well, with occupancy rates being well below expectations.
GROUP REVENUES PER AVAILABLE ROOM
Group revenues, which essentially refers to the RevPAR earned from group bookings, shot up by 6%, owing to a good strength in company meetings.
Indeed company meetings are not going to be suspended in as much speed, as leisure travels would be suspended, on the onset of an eonomic recession.
Hence this is that one consumer segment that is pretty resilient, and willing to bear a much higher price for their hotel bookings. The group bookings are also a great way to explore the kind of businesses and guests that a hotel like Hilton is able to attract (since most of these people have a similar way of thinking/living), and this information can be used to not just personalize, but hyperpersonalize the marketing efforts used ot retain them.
There was also another notable mention of business transient guests, who are those guests that work for MSME's. These guests tend to book a room for just themselves in order to attend conferences, client meetups etc and this is also a particularly notable feature.
You see when larger companies have to mass book for a large number of employees, they might still decide to opt for a cheaper outlet that is of a 4-4.5 star rating quality.
However when an individual only has to book for themselves, and this booking is to facilitate a client meetup or a conference, then they will value booking a hotel that can act as a status symbol and hence the more luxurious and expensive their place of stay is, the better.
These customers may actually be seeking luxury which gives these hotels an additional pricing power with such customers. Hotels must hence seek to monitor trends in this space, which locations attract these customers the most (for eg: a place conducive for business conferences) etc and ensure they set up their most high profile hotels in this space.
REVENUE FOR EVERY REGION!
AMERICA(s)In the US the revenue grew by 2.1% on a YoY basis which was largely driven by group bookings. However even though the overall RevPAR underperformed to expectations, the company's adjusted EBIDTA and EPS for the quarter continued to soar higher, through the skies.
This is because most of Hilton's money does not come from room revenues, but from franchising/management fees. Although screening a franchisee is a labourous process, but once selected, there isn't really much operational expenditures that Hilton as a brand would need to undertake once the franchisee is finalized. There can be a lot of money earned with very limited expenditures from this point on.
This effectively contributed to better operational cash flows with lesser revenues per room.
In the South America region, the onset of the carnival season attracted a lot of travellers this quarter, which grew their RevPAR on YoY basis by more than 7%.
EMEA
The EMEA region also saw pretty great growth this year due to the holy month of Ramadan, which attracts muslims globally to Saudi Arabia. These pilgrimages bolstered their RevPAR, despite the sales that were lost due to the shift in the Easter holidays.
It is also noteworthy that the EMEA regions consist of several affluent people who treasure the idea of luxury and comfort during their hotel stays. In this quarter Hilton set up their 1000th hotel in this region, most of which are luxury based. This creates a big opportunity to capitalize on a strong pricing potential.
CHINA
China celebrated the Chinese New Year this quarter, which alone is a grand 5 days of public holiday. This period encourages a lot of outbound travel, and hence the occupancy rates within China remained quite low.
As for the remaining places within the Asia Pacific there is a growing conciousness among all hotel chains of the impact that the middle or aspirational class has on their business, and how they create a strong demand and desire for their services, which should be capitalized.
This was discussed with in the McKinsey report as well, and this becomes more evident when we read Hilton's earnings call for 2025 Q1.
NEW BEGINNINGS AND DEVELOPMENTS
Hilton seems to have approved more than 32000 rooms, mostly situated within cities in India, Egypt and some in Africa as well. They have begun to approve their 'Hilton Garden Inn' hotels to be constructed in many regions including the Philippines and Indonesia, to tap into the massive potential catering to the aspirational middle class, brings.
It is also interesting to see how despite recessionary pressures, and threats of lowered occupancy, Hilton continues to prioritize their development journey, and this is definitely one of the key reasons supporting their resilient business model. In Q1 alone, hotel openings grew by 20%, and 40% of these was due to conversions.
Conversions are an interesting conecpt in the hotel industry too. A hotel is 'converted' when newwer ammenities are added to it, or even if its ambience and aesthetics are revised to cater to a growing demand from a different type of audience.
According to Hilton their 2 brands, Curio and Tapestry, are easiest to convert, and setting these up in the more diverse and dynamic locations is definitely going to be a solid way to make lasting impressions on guests.
Speaking of lasting impressions, there is a certain localized touch that most Hilton hotels contain. This is something that the McKinsey report highlights as well, that as we step into the future it is crucial that we customize the hotel experiences that each guest has to undergo. This would involve adding a local touch of the place that the hotel is located in, adding an ambience that matches the celebratory essence of the place it is located in, and fewer nuances that align well with the mindset of the guests at that time.
Hilton, for instance, recently set up their higher end Waldorf Austria hotel in the Osaka region of Japan, opening the guests to an extremely beautiful skyline view from a 252 storey building, that resonates with the story of Osaka by itself.
All these nuanced strategies and keen focus towards the untapped markets makes Hilton a highly resilient business and expands its already significant potential.
If you'd like us to cover any hotel chain in our next bogpost be sure to leave a comment with your ideas ;) Thank you so much for getting till here, and see you really soon with another post! :)
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