RevPAR from Hilton Owned Hotels in North America Up 10.2%, Led by
Chicago, New York, San Francisco and Phoenix
Hotel Operating Statistics
|BEVERLY HILLS, Calif. - Hilton Hotels Corporation (NYSE:HLT) today
reported financial results for the fourth quarter and fiscal year ended
December 31, 2006. Fourth quarter highlights compared to fourth quarter
2005 are as follows:
• Diluted EPS of $.50 vs. $.26 in 2005, an increase of 92%.Hilton reported fourth quarter 2006 net income of $207 million compared with $105 million in the 2005 quarter. Diluted net income per share was $.50 in the 2006 fourth quarter, versus $.26 in the 2005 period.
In total, non-recurring items benefited the 2006 quarter by approximately $.11 per share as follows:
• $11 million pre-tax benefit ($.02 per share) from contract termination fees related to the sale of a joint-venture hotel;Additionally, fourth quarter results included a revision to the full year effective tax rate primarily due to higher than expected utilization of foreign tax credits against the company's U.S. income tax liability. This revision benefited fourth quarter results by $31 million or $.07 per share. In the 2005 fourth quarter, non-recurring items benefited results by $.04 per share.
The company reported fourth quarter 2006 total operating income of $358 million (an 85 percent increase from the 2005 quarter,) on total revenue of $2.232 billion (a 106 percent increase from $1.083 billion in the 2005 quarter.) Total company earnings before interest, taxes, depreciation and amortization (Adjusted EBITDA) were $485 million, an increase of 78 percent from $273 million in the 2005 quarter.
System-wide RevPAR; Management/Franchise Fees
All of the company's brands reported significant system-wide revenue-per-available-room (RevPAR) increases, with particularly strong gains in average daily rate (ADR). On a system-wide basis (including owned, leased, managed and franchised properties) and pro forma as if the acquisition of Hilton International (HI) had occurred January 1, 2005, the company's brands showed fourth quarter RevPAR gains as follows: Scandic, 18.1 percent; Conrad, 15.8 percent; Hilton, 12.2 percent; Embassy Suites, 9.9 percent; Doubletree, 9.7 percent; Hampton, 9.0 percent; Hilton Garden Inn, 8.1 percent; and Homewood Suites by Hilton, 6.9 percent.
Management and franchise fees increased 60 percent in the fourth quarter to $182 million, benefiting from RevPAR gains, the addition of new units, and the acquisition of HI. Fees in the quarter also include a one-time $11 million management contract termination fee related to a joint-venture hotel. The property was sold and converted to a franchised hotel during the quarter.
Owned Hotel Results
Continued strong demand trends and pricing power resulted in high single
digit or double digit ADR increases at many of the company's gateway hotels
around the world. Business transient, group and leisure segments each showed
significant ADR improvement.
Comparable North America (N.A.) owned revenue and expenses increased 10.7 percent and 9.2 percent, respectively. Expenses were impacted by higher insurance and marketing costs.
RevPAR from comparable N.A. owned hotels increased 10.2 percent (91 percent rate driven.) Comparable N.A. owned hotel occupancy increased 0.7 points to 76.3 percent, while ADR increased 9.2 percent to $220.77. Particularly strong RevPAR growth was reported at the company's owned hotels in Chicago, New York, San Francisco and Phoenix. Results also benefited from higher food and beverage revenue and profits in the quarter. Comparable N.A. owned hotel margins in the fourth quarter increased 90 basis points to 33.4 percent. The aforementioned higher insurance and marketing costs impacted margins by approximately 120 basis points. Renovation activity at the Waldorf=Astoria, Hilton New York and Hilton Hawaiian Village did not significantly impact results during the fourth quarter.
On a pro forma basis, as if the acquisition of HI had occurred January 1, 2005, comparable international owned revenue and expenses increased 9.7 percent and 8.7 percent, respectively. Pro forma RevPAR from international comparable owned hotels increased 12.8 percent (92 percent rate driven.) Occupancy increased 0.7 points to 68.9 percent, while ADR increased 11.7 percent to $147.34. Strong results were reported in Barcelona, Brussels, Sao Paulo and Zurich. Excluding the impact of foreign exchange, RevPAR from international comparable owned hotels increased 6.0 percent. Pro forma comparable international owned margins improved 70 basis points to 26.5 percent.
On a worldwide basis, pro forma comparable owned RevPAR increased 10.7 percent (91 percent rate driven,) with margins increasing 90 basis points to 31.8 percent. Excluding the impact of foreign exchange, worldwide pro forma comparable owned RevPAR increased 9.2 percent.
Revenue from leased hotels was $731 million in the fourth quarter 2006 compared to $24 million in the 2005 quarter, while leased hotel expenses were $605 million in the current quarter versus $22 million last year. The EBITDAR-to-rent coverage ratio was 1.9 times in the quarter.
Pro forma comparable leased revenue increased 14.0 percent, leased expenses increased 11.6 percent and margins increased 170 basis points to 17.0 percent. RevPAR from comparable leased properties increased 17.4 percent. Excluding the impact of foreign exchange, RevPAR from comparable leased hotels increased 9.9 percent. Strong results were reported at the company's leased hotels in London, Amsterdam, Paris, and across Germany and the Nordic region.
Hilton Grand Vacations
Hilton Grand Vacations Company (HGVC), the company's vacation ownership business, reported an 11 percent increase in profitability in the fourth quarter of 2006 compared to 2005, due primarily to increased financing income. Although average unit sales prices increased 15 percent and unit sales increased 8 percent, percentage-of-completion accounting negatively impacted the reported results.
HGVC had fourth quarter revenue of $142 million, a 9 percent increase from $130 million in the 2005 quarter. Expenses were $121 million in the fourth quarter, compared with $111 million in the 2005 period.
Brand Development/Unit Growth
In the fourth quarter, the company added 59 properties and 9,040 rooms to its system as follows: Hilton Garden Inn, 18 hotels and 2,616 rooms; Hampton Inn, 21 hotels and 1,980 rooms; Embassy Suites, 5 hotels and 1,384 suites; Hilton, 4 hotels and 1,136 rooms; Homewood Suites by Hilton, 8 hotels and 885 suites; Doubletree, 2 hotels and 438 rooms; and other, 1 hotel and 601 rooms.
Nineteen properties and 4,066 rooms were removed from the system during the quarter.
During the fourth quarter, the company added new full-service hotels in Boston, Chicago, Mexico City, Tampa, Honolulu, Kauai, and Manchester, U.K. The company also added the Qasr Al Sharq in Jeddah, Saudi Arabia to the Waldorf=Astoria Collection. In addition, the company opened new Hilton Garden Inns in Florence and Rome, Italy.
During the quarter, the company announced plans to form a joint venture with DLF Limited to develop hotel properties and serviced apartments in India. The joint-venture company plans to develop and own 50-75 midscale and extended-stay hotels over the next seven years. The company also announced an agreement to develop and franchise an initial 25 Hilton Garden Inns in Beijing, Shanghai and Tianjin, China to Deutsche Asset Management and HQ Asia Pacific. The company also announced that it has signed a management agreement for a new Conrad in Koh Samui, Thailand scheduled to open in 2008.
At December 31, 2006, the Hilton worldwide system consisted of 2,935 properties and 501,478 rooms. The company's current development pipeline is its biggest yet, and the largest for any U.S.-based hotel company, with more than 775 hotels and 110,000 rooms at December 31, 2006. Approximately 90 percent of the hotels in the current development pipeline are in the Americas (U.S., Canada, Mexico and South America,) though international development is expected to comprise an increasingly larger percentage of the company's development pipeline over the next few years.
Hilton noted that the sale processes continue for the Scandic portfolio, 10 hotels in Continental Europe, the Hilton Caledonian in Scotland, and six properties in the U.S. First or second round bids have been received for 14 of the 17 properties for sale and Scandic.
As previously announced, during the fourth quarter the company completed the sale of two hotels located in the U.K., the 1,054-room Hilton London Metropole and the 794-room Hilton Birmingham Metropole, for GBP 417 million.
At December 31, 2006, Hilton had total debt of $6.97 billion (net of approximately $500 million of debt and capital lease obligations resulting from the consolidation of certain joint-venture entities and a managed hotel, which are non-recourse to Hilton,) a reduction of approximately $860 million from September 30, 2006. Of the $6.97 billion, approximately 53 percent is floating rate debt. Total cash and equivalents (including restricted cash of approximately $293 million) were approximately $420 million at December 31, 2006.
The company's average basic and diluted share counts for the fourth quarter were 387 million and 422 million, respectively. Hilton's debt currently has an average life of 6.1 years, at an average cost of approximately 6.6 percent.
Hilton's effective tax rate in the fourth quarter 2006 was 22.5 percent.
As previously noted, the fourth quarter effective tax rate benefited from
a higher than expected utilization of full-year 2006 foreign tax credits
and a non-recurring item related to the prior year's tax return.
For full-year 2006, Hilton reported net income of $572 million, compared to $460 million in 2005. Diluted net income per share was $1.39 versus $1.13 in 2005. Non-recurring items benefited the 2006 full-year period by $.18 per share, versus $.28 per share in 2005. On a recurring basis (including the full year impact of a lower effective tax rate due to higher than expected utilization of foreign tax credits,) EPS was $1.21 versus $.85 in 2005, an increase of 42 percent. Total company operating income was $1.274 billion in 2006 (compared with $805 million in 2005) on revenue of $8.162 billion (compared with $4.437 billion in 2005.) Total company Adjusted EBITDA was $1.742 billion, a 53 percent increase from $1.140 billion in 2005. Management and franchise fees were $684 million, a 51% increase from $452 million in 2005. Timeshare profitability was up 19% versus 2005. The company added 223 hotels and 35,970 rooms in 2006.
The company provided the following updated estimates for full-year 2007, which excludes the impact of any future asset sales, share repurchases, or other potential significant transactions:
Total revenue: $8.885
to $9.050 billion
The 2007 guidance includes incremental operating and corporate costs associated with international growth and development activities and technology initiatives. The guidance also includes cost increases related to stock compensation, including incremental costs from extending the company's equity compensation plans to international employees. The 2007 effective tax rate guidance assumes full utilization of available foreign tax credits.
As previously communicated, 2007 diluted EPS guidance includes the following two items which combine to adversely impact diluted EPS growth by a total of $.14 per share:
The company expects to add approximately 255 hotels and 35,000 rooms to its system in 2007.
Stephen F. Bollenbach, co-chairman and chief executive officer of Hilton Hotels Corporation, said: "A historic and successful year that began with our acquisition of Hilton International ended with another strong quarter, highlighted by excellent RevPAR growth both domestically and internationally, and significant progress in introducing our brands to new markets around the world. We are particularly excited about the agreements we signed with respected partners to develop Hilton Garden Inns and other Hilton Family brands in India and China. These agreements lay the foundation for our global growth going forward.
"With our market leading presence in such robust markets as New York City, Chicago, Hawaii and London; a domestic and international development pipeline that guarantees rapid growth, and strong demand for our timeshare properties, the elements are in place for continued solid operating results in 2007."
Mr. Bollenbach concluded: "We expect that the operational, development,
marketing and financial plans we have in place for 2007 will further enhance
our industry-leading position."
This press release contains "forward-looking statements" within the meaning of federal securities law, including statements concerning business strategies and their intended results, and similar statements concerning anticipated future events and expectations that are not historical facts.
|Also See:||Hilton Hotels Corp. 4th Quarter Profit Up 62%; Strong Demand Brings Double-digit RevPAR Growth in All Major Markets / Hotel Operating Statistics / January 2006|
|Hilton Hotels Corp. 4th Quarter Income Slips to $65 million from $67 million a Year Ago; For Full-year 2004, Hilton's Net Income of $238 million Jumps 45% Over $164 million in 2003 / Hotel Operating Statistics / January 2005|
|Hilton Reports Solid Occupancy Levels for 4th Quarter; For the Full Year 2003 Net Income Down 17% to $164 million from $198 million a Year Earlier / Hotel Operating Statistics / January 2004|
|Hilton Hotels Corp. Reports Large Increase in 4th Quarter Net Income to $40 million Compared with $4 million in 4th Quarter 2001; Cites Strong Occupancy in New York, Boston, Chicago and Hawaii / Hotel Statistics / Jan 2003|
|Hilton's RevPAR Down 22.8% for Fourth Quarter / Year End Hotel Statistics / Jan 2002|
|During 2000 Hilton RevPAR Up 7.8%, Occupancy Improved 2.0 points to 73.3% / Jan 2001|
|Hilton Reports RevPAR from Owned Properties Increased 3 % in 1999; Occupancy of 69.2 % down from 70.3 % / Feb 2000|
|Occupancy at Hilton Owned Properties in 1998 Declined to 75.0 %, While ADR Increased 8.3 % / Feb 1999|