Hilton Worldwide Reports a Q4 2016 Loss of $382 Million; Net Income for Full Year was $364 Million
February 15, 2017 10:57am
MCLEAN, Va. - Hilton Worldwide Holdings Inc. ("Hilton," or the "Company") (NYSE: HLT) today reported its fourth quarter and full year 2016 results. The Company completed the spin-off of Park Hotels & Resorts Inc. ("Park") and Hilton Grand Vacations Inc. ("HGV") (the "spin-offs") in January 2017. All results herein present the performance of Hilton without giving effect to the spin-offs, unless otherwise specified. Additionally, all share and share-related information presented herein have been retroactively adjusted to reflect the 1-for-3 reverse stock split of Hilton's outstanding common stock that occurred in January 2017 (the "Reverse Stock Split"), unless noted otherwise. Highlights include:
For the three months ended December 31, 2016, diluted loss per share was $1.17 compared to diluted earnings per share ("EPS") of $2.47 for the three months ended December 31, 2015, and diluted EPS, adjusted for special items, was $0.70 for the three months ended December 31, 2016 compared to $0.65 for the three months ended December 31, 2015. Net loss was $382 million for the three months ended December 31, 2016 compared to net income of $816 million for the three months ended December 31, 2015, and Adjusted EBITDA was $751 million for the three months ended December 31, 2016 compared to $745 million for the three months ended December 31, 2015.
During the three months ended December 31, 2016, the Company incurred an aggregate tax charge of $513 million related to a corporate restructuring executed before the spin-offs, resulting in a net loss for the period. The event had no effect on cash taxes for the quarter. See "Non-GAAP Financial Measures Reconciliations—Net Income and Diluted EPS, Adjusted for Special Items" for additional information.
For the year ended December 31, 2016, diluted EPS was $1.05 compared to $4.26 for the year ended December 31, 2015, and diluted EPS, adjusted for special items, was $2.68 for the year ended December 31, 2016 compared to $2.44 for the year ended December 31, 2015. Net income was $364 million for the year ended December 31, 2016 compared to $1,416 million for the year ended December 31, 2015, and Adjusted EBITDA was $2,975 million for the year ended December 31, 2016 compared to $2,879 million for the year ended December 31, 2015.
Christopher J. Nassetta, President & Chief Executive Officer of Hilton, said, "For the quarter and full year, performance met our expectations. We also continued to increase our development activity this quarter and surpassed development records this year, approving 106,000 new rooms and opening nearly one hotel per day, contributing to net unit growth of over 45,000 rooms. With completion of the spin-offs, Hilton is a fee-based, capital-efficient and resilient business, with meaningful cash flow that we intend to be very disciplined in returning to stockholders."
On January 3, 2017, Hilton completed the spin-offs of Park and HGV. As a result of the spin-offs, Hilton stockholders of record of its common stock as of close of business on December 15, 2016 received one share of Park common stock for every five shares of Hilton common stock and one share of HGV common stock for every ten shares of Hilton common stock. Transaction costs related to the spin-offs are in line with expectations.
Management and Franchise
Management and franchise fees were $436 million in the fourth quarter of 2016. RevPAR at comparable managed and franchised hotels in the fourth quarter of 2016 increased 1.0 percent on a currency neutral basis (flat in actual dollars) compared to the same period in 2015. The addition of new units also contributed to the fee growth during the fourth quarter of 2016, and, as new units stabilize in Hilton's system, fees are expected to increase.
For the full year 2016, management and franchise fees were $1,786 million. RevPAR at comparable managed and franchised hotels for the full year 2016 increased 2.0 percent on a currency neutral basis (1.2 percent in actual dollars) compared to the same period in 2015. The addition of new units, the increase in RevPAR at comparable managed and franchised hotels and rising effective franchise fee rates have yielded continued fee growth during 2016.
Revenues from the ownership segment were $1,029 million in the fourth quarter of 2016 and ownership segment Adjusted EBITDA was $259 million. RevPAR at comparable hotels in the ownership segment was flat on a currency neutral basis (a 2.7 percent decrease in actual dollars) in the fourth quarter of 2016 compared to the same period in 2015. Ownership segment RevPAR in the fourth quarter of 2016 was pressured by decreased group revenues at certain properties due to renovations and challenging year over year comparisons.
During the full year 2016, revenues from the ownership segment were $4,157 million and ownership segment Adjusted EBITDA was $1,029 million. RevPAR at comparable hotels in the ownership segment increased 0.8 percent on a currency neutral basis (a 0.7 percent decrease in actual dollars) for the full year of 2016 compared to the same period in 2015.
A portfolio of 67 of Hilton's owned and leased hotels and resorts was included in the spin-off of Park and, as part of its on-going relationship with Park, Hilton has entered into long-term management or franchise agreements for each of these properties.
Timeshare segment revenues for the fourth quarter of 2016 were $370 million and timeshare Adjusted EBITDA was $103 million. Overall sales volume increased 14 percent in the fourth quarter of 2016, compared to the same period in 2015, as a result of increased tour flow and net volume per guest. Revenue from resort operations increased 20 percent during the fourth quarter of 2016 from the same period in 2015.
Timeshare segment revenues were $1,390 million for the full year 2016 and timeshare Adjusted EBITDA was $381 million. The improvement in timeshare segment revenues was a result of a rise in sales volume resulting from increases in both commissions recognized from the sale of third-party developed intervals and revenue from the sales of owned timeshare intervals, as well as growth in resort operations. These increases were partially offset by increased timeshare expenses resulting from higher selling and marketing expenses.
During the three months and year ended December 31, 2016, 54 percent and 60 percent of timeshare intervals sold were developed by third parties, respectively. Hilton's overall supply of timeshare intervals as of December 31, 2016 was approximately 163,000 intervals, of which 117,000, or 72 percent, were third-party developed.
Hilton's timeshare business was included in the spin-off of HGV and, as part of its on-going relationship with HGV, Hilton and HGV have entered into a 100-year license agreement for use of the timeshare brand.
Hilton opened 105 hotels consisting of 15,700 rooms, of which over 22 percent were conversions from non-Hilton brands, and achieved net unit growth of 15,100 rooms during the fourth quarter of 2016. During the full year 2016, Hilton opened 354 hotels consisting of 51,500 rooms, of which over 22 percent were conversions form non-Hilton brands, and achieved net unit growth of over 45,000 rooms.
As of December 31, 2016, Hilton's rooms pipeline totaled approximately 310,000 rooms at 1,968 hotels throughout 96 countries and territories, including 32 countries and territories where Hilton does not currently have any open hotels. Over 159,000 rooms, or more than half of the pipeline, were located outside of the United States. Additionally, over 157,000 of the rooms in Hilton's pipeline were under construction.
Tru by Hilton had continued success in its initial year of development, with approvals for 35 hotels in the fourth quarter for a total of 179 hotels in the pipeline as of December 31, 2016. As of January 31, 2017, Tru had nearly 400 hotels in the pipeline or in various stages of approval. In January 2017, Hilton launched its 14th brand, Tapestry Collection by Hilton, offering travelers a refreshing choice for independent hotels in the growing upscale segment. As of January 31, 2017, Tapestry Collection by Hilton had over 40 deals in process. The first Tapestry is expected to open by the third quarter of 2017.
Balance Sheet and Liquidity
During the fourth quarter of 2016, in preparation for the spin-offs, Hilton entered into the following financing transactions, of which the debt incurred by Park and HGV is the sole obligation of those entities following the spin-offs:
Also during the fourth quarter of 2016, Hilton repaid the outstanding balance of $3,418 million on the CMBS loan entered into in 2013 and a $450 million mortgage loan, using net proceeds from 2016 borrowings and available cash.
As of December 31, 2016, Hilton had $10.2 billion of long-term debt outstanding, with a weighted average interest rate of 4.2 percent, of which $3.0 billion was transferred to Park and $0.5 billion was transferred to HGV in connection with the spin-offs.
Total cash and cash equivalents was $1,684 million as of December 31, 2016, including $266 million of restricted cash and cash equivalents, of which $350 million was transferred to Park and $151 million was transferred to HGV in connection with the spin-offs. No borrowings were outstanding under any of the revolving credit facilities as of December 31, 2016.
In December 2016, Hilton paid a quarterly cash dividend of $0.07 per share on its then outstanding shares of common stock, for a total of $70 million, bringing total cash dividends paid in 2016 to $277 million.
The HNA Tourism Group Co., Ltd. is expected to complete its acquisition of a 25 percent equity interest in each of Hilton, Park and HGV, subject to customary closing conditions, from affiliates of The Blackstone Group L.P. for approximately $6.5 billion during the first quarter of 2017.
The Full Year 2017 and First Quarter 2017 outlooks include the effects of the spin-offs of Park and HGV. The outlooks of Park and HGV will be presented as part of their respective earnings releases. Beginning in the first quarter of 2017, commensurate with the completion of the spin-offs, the historical financial results of Park and HGV will be reflected as discontinued operations in Hilton's consolidated financial statements.
Full Year 2017
First Quarter 2017
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Tags: hilton worldwide,
q4 2016 results
Hilton (NYSE: HLT) is a leading global hospitality company, with a portfolio of 14 world-class brands comprising more than 4,900 properties with over 800,000 rooms in 104 countries and territories. Hilton is dedicated to fulfilling its mission to be the world's most hospitable company by delivering exceptional experiences - every hotel, every guest, every time. The Company's portfolio includes Hilton Hotels & Resorts, Waldorf Astoria Hotels & Resorts, Conrad Hotels & Resorts, Canopy by Hilton, Curio - A Collection by Hilton, DoubleTree by Hilton, Tapestry Collection by Hilton, Embassy Suites by Hilton, Hilton Garden Inn, Hampton by Hilton, Tru by Hilton, Homewood Suites by Hilton, Home2 Suites by Hilton and Hilton Grand Vacations. The Company also manages an award-winning customer loyalty program, Hilton Honors. Hilton Honors members who book directly through preferred Hilton channels have access to instant benefits, including a flexible payment slider that allows members to choose exactly how many Points to combine with cash, an exclusive member discount that can't be found anywhere else and free standard Wi-Fi. Visit newsroom.hilton.com for more information
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