• Mon. May 20th, 2024

Hotel Companies Raise 2023 Revenue Expectations


May 16, 2023
After a strong first quarter, executives at hotel companies in general were highly optimistic, raising their guidance for full-year revenue. (Getty Images)


A strong first quarter to start the year left hotel companies broadly optimistic as executives made widespread increases to full-year 2023 revenue per available room projections.

Here are some of the highlights from quarterly earnings calls highlighting the source of that optimism for the remainder of the year.

“We’re updating our full-year 2023 outlook to reflect first quarter favorability as well as a lower share count due to our first quarter repurchase activity. Fee-related and other revenue increases by $4 million from February’s outlook and still rounds to $1.38 billion to $1.41 billion. Adjusted [earnings before interest, taxes, depreciation and amortization] increased $4 million as well and is now projected to be $654 million to $664 million. We expect adjusted net income of $340 million to $352 million, $3 million higher than our prior outlook. And adjusted diluted EPS increased $0.08 per share and is now projected to be $3.92 to $4.06 based on a diluted share count of 86.8 million, which, as usual, excludes any future potential share repurchases.

“There are no changes to our prior outlook for global net room growth, global RevPAR growth or for our free cash flow conversion rate. Also, while our full-year expectations for the marketing funds contribution remains unchanged, I want to provide some color on the projected quarterly impacts. As we expect a more normalized cadence of marketing spend this year, fund expenses will again outpace fund revenues during the second quarter by $10 million to $15 million. As we move into the back half of the year, fund revenues will outpace fund expenses to arrive at our estimated full-year underspend of $10 million, which will complete our recovery of the $49 million investment that we made back in 2020.”

“Seasonally adjusted continued strength in leisure demand and recovery in business travel during the quarter enabled us to achieve comparable hotels RevPAR of $109, a 19% increase over first quarter 2022 and a 6% increase over first quarter 2019. …

“Our outlook continues to reflect a broader range of comparable hotels’ RevPAR change and other key metrics for 2023 and anticipate that the lodging industry recovery will be impacted by macroeconomic headwinds in the latter portion of the year though top-line performance for April remained strong and forward bookings continue to be elevated to pre-pandemic levels.

“While we have limited visibility based on the current booking window, we are encouraged by recent trends and the strength of fundamentals for our business, which if sustained, would put us in a position to perform at the high end of our guidance range. We will continue to assess guidance in context of actual performance for our hotel and changing consensus views related to the broader economy. As has been the case in the past, we expect RevPAR growth for our portfolio to generally align with actual growth rates for our brands and chain scales.

“As a reminder, for the full year, we expect net income to be between $165 million and $209 million; comparable hotels RevPAR change to be between 3% and 7%; comparable hotels adjusted hotel EBITDA margin to be between 35.3% and 36.9%, and adjusted EBITDAre to be between $420 million and $457 million.”

“With the better-than-expected first-quarter results and robust global booking trends, we are raising our full-year guidance. Macroeconomic uncertainty is not impacting our short‐term demand, and trends across all customer segments remain strong. The second quarter is expected to benefit from particularly strong year-over-year growth in international markets, especially in Asia-Pacific. However, there is less visibility in forecasting the company’s financial performance for the second half of the year.  

“The high end of the range reflects relatively steady global economic conditions throughout the remainder of 2023, with continued resilience of travel demand across all customer segments and markets. The low end of the range reflects a meaningful softening of the global economy in the second half of the year, with worldwide RevPAR in the last two quarters roughly flat compared to 2022.  

“For the full year, RevPAR in the U.S. and Canada could grow 6-9% and international RevPAR could grow 22-25% percent, leading to global RevPAR rising 10-13%.”

“We kicked off the first quarter of 2023 with meaningful outperformance, delivering a RevPAR improvement of 31% compared to the first quarter of 2022, exceeding the top end of our first quarter RevPAR guidance by 4 percentage points. … Our comparable hotel EBITDA of $439 million in the first quarter was 18% above 2019 and 44% above 2022, driven by both occupancy increases and continued rate strength, particularly in the group business segment at our downtown hotels. First-quarter comparable hotel EBITDA margin of 32.5% was meaningfully ahead of 2022 and exceeded 2019 for the fourth consecutive quarter.

“Our strong performance in the first quarter, coupled with our improved outlook for the year, allowed us to substantially raise and tighten our full-year RevPAR growth guidance range to 7.5% to 10.5%, nearly doubling the midpoint of our full year expected RevPAR growth to 9% from 5% last quarter. This marks the fourth consecutive quarter since the onset of the pandemic that we have achieved RevPAR, adjusted EBITDAre and EBITDA margins ahead of 2019. And at the midpoint, our full-year 2023 RevPAR guidance is 7% above 2019. Our outperformance is a result of the capital allocation decisions made over the last six years and our unwavering focus on expense control and margin improvement. It is worth noting that at the 9% midpoint, we raised our adjusted EBITDA guidance by $125 million, which is significantly above our first-quarter outperformance of over $40 million relative to consensus. Lastly, at the midpoint of our range, our full-year 2023 EBITDA is forecasted to be 3% above 2019. We are also providing second-quarter comparable hotel RevPAR growth guidance of 4-6%.”

“We are increasing our full-year 2023 systemwide RevPAR growth expectations to a range of 12-16% compared to 2022 on a constant currency basis. We continue to expect larger growth rates over the first half of the year in the mid-to-high 20% range. And as we have a bit more visibility into the second half of the year, we now expect RevPAR growth will be in the mid-to-high single digits. And the continued recovery in Asia-Pacific and ongoing improvements in group and business transient demand serve as key contributors to our improving RevPAR growth expectations over the back half of the year.”

“Turning to our updated 2023 guidance. We significantly raised and tightened our full-year comparable hotel RevPAR growth range to 7.5% to 10.5%. Our improved outlook is driven by outperformance in the first quarter, better visibility into the second quarter and continued strong group booking activity in the second half of the year. As it relates to the business transient recovery, it is worth noting that we may not see a decrease in demand if a slowdown occurs in other parts of our business as business transient demand is still not fully recovered to 2019 levels.

“Given the continued macroeconomic uncertainty, our guidance range contemplates a varying degrees of a slowdown in the second half of the year, particularly for the group segment. Further improvement will continue to depend on the broader macroeconomic environment, our ability to maintain high rated business in resort markets and the continued improvement of group, business transient and international inbound travel. In this context, we would expect year-over-year comparable hotel RevPAR percentage changes in the second half of the year to be up low single digits at the midpoint of our guidance.”

“Based on the better-than-expected [first-quarter] results, the accelerated demand across Asia and continued positive momentum in group, we now expect full-year system-wide top-line growth between 8% and 11% versus 2022, assuming some slowdown in the back half of the year due to macroeconomic uncertainty, particularly in the U.S.”

“Part of [our raised guidance] is we’re not seeing any cracks in terms of demand patterns. There is a lot of momentum. … Having said that, we know here in the U.S. and in many other places around the world, there’s an inflation issue. Now it’s being managed. It’s in the process of normalizing. … Ultimately that means you’re going to continue to have a slowing of the broader economic environment that, at some point, has to have some impact on us. But it hasn’t yet. One, I still think we have a lot of pent-up demand. Two, we are still benefiting from a secular shift in spending patterns. And international travel is finally, with China opening up … on a steep up-slope. All of those things are keeping the momentum in demand.”

* Editor’s note: Chris Nassetta serves on the board of directors for Hotel News Now’s parent company, CoStar Group.

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