Hilton Worldwide CFO on the state of the travel and hospitality industry and outlook for the company

Alright, set, ready to

travel

, the domestic summer

travel

boom is ready to begin, as Memorial Day weekend marks the unofficial start of summer here in the US and joins to us now to talk about the

state

of the travel

industry

. I'm Kevin Jacobs, he's the CFO and President of Global Development for Hilton. Kevin really appreciates you taking the time to talk to us this morning, so let's start by describing, if you could, where your business is as we approach this again. Memorial Day weekend in three. Really key summer months for the travel

industry

, where most economies are, most

state

economies, open vaccines continue to roll out.

What state is the Hilton business in right now? Yes, first of all, thank you for inviting me, it's good to be with you. As always, I hope to be able to get back in the studio and do this in person again soon, but I would say look, I would say our business is heavily in recovery mode, as we have been, so our business has changed. a corner in March as vaccination levels, you know particularly in the US, you know vaccines started coming out there, people started to feel safer, you know, moving around and like I said, really in March, you know, We reached approximately 55 occupancy in March. built for about 60 occupancy systemwide in April and things have continued to improve from there, so we are definitely on the mend and looking forward to a really strong summer travel season.

Kevin, so much of the money is generated in business travel that executive taking out his corporate credit card spending $100 for a dinner, are you seeing a recovery in business travel? Yeah, it's coming, I mean, I would say, Brian, you know so far, it's been led by leisure travel and it's probably going to continue that way. led by leisure travel in the summer, but interestingly, business travel has not been zero even in the first quarter, our business travel levels from a volume perspective were about 50 percent of what they were in 2019 before the pandemic started so obviously that's 50 less so it's not great but I think you know when we tell people that and we talk about it I think people are surprised to hear that the Business trips have been even as strong and we hope you know that by the fourth. quarter by the end of the year, business travel will be about 70 75 of what it was in 2019 and it will continue to increase from there and you know, as we get particularly close to the fall and the schools go back and people start to return to At the office, we really believe that business, you know, it's been a leisure-led recovery so far, but business will be a quick follow.

I'm Kevin, I'm Julie. I want to follow up on that. A bit. Someone intervened in business problems. This week, Brian Chesky, the CEO of Airbnb, said that he doesn't think it will ever be where he was, that it will never look like it did before because the bar is higher because we know we can do it. meetings remotely and things like that, so when you talk about going back, I mean, do you think there's kind of a lower potential or a lower limit on business travel compared to what it used to be? I don't mean look, Brian is a smart guy. built, he's built a good business and you know, I guess we'll see who ends up being right, but we're not big believers in the new normal and the new normal, I'm sorry, and I think you know that like the world.

We're kind of coming back, we've learned that we can do certain things effectively like this, you know, I guess we're on Skype now, but you know, video conferencing technology is not new, it's been around for a while, I think the pandemic has given us taught. We may all use it a little differently, but we think you know if some business travel is going to be replaced by technology and maybe companies will use lower value travel occasions that you know you should go ahead and not travel and do. something. Um, you know by video conference, but we think you know that each of those trips, if not, more will be replaced by greater value, maybe you will spend more time looking for new business and, in general, the economic recovery.

I mean, if you look at the highest correlation. Well, for travel and particularly business travel, you know for a long time it's been non-residential fixed investments or commercial capital expenditures and you know, I think if last time I looked at the projections for non-residential fixed investments around seven percent this year and People expect it to be at a similar level next year, so generally economic activity drives business travel and if you and the other thing I would say is if you think the world will be a little more remote and businesses will be a little bit more remote, that's one more reason why people have to gather and gather, so if there is some level of permanent decline in business travel, which again we don't think that's the case, but if so is the case that just means people have to get together more because you know there's no substitute for real human interaction, people get together and collaborate, you know, drive their businesses, so with all due respect to Brian, you know that the vast majority of its demand is driven by leisure.

And you know, a world without business travel is good for Brian, so I'll leave it at that, Kevin, since the last time we spoke, I think it was 2019. In our studies, you added a new component to the development of your title. Many new Hilton hotels will open this year next year. Well, we believe that first of all, yes, I mean, I now have the privilege of leading our global development organization, which I'm very excited about. You know, we opened about 22,000 rooms in the first quarter, we think that's a pretty good run rate, we think we'll grow at a rate of, you know, four to five percent net units over the next few years, probably in the top end of this year, so we have a lot going on. around the world, you know, on the development front, that's really exciting and you know, Kevin, I would be remiss if I didn't ask about two topics that we certainly have a lot of interest in from our viewers, which is price increases. .

If they know how to implement something, what's happening with pricing on the rooms side and also what they're seeing on the labor side, meaning the ability to hire the talent they need and what has been a very competitive labor market. . especially in the leisure industry, yeah, miles, look at the prices, look, the laws of supply and demand dictate what the price is, we have very sophisticated revenue management algorithms that, you know, do a very good job of adjusting rates really in real time, you know, so as demand recovers, we can give in on rates and we're already seeing that in markets that are open.

You know, we're getting pretty close to Stella. We have no problem generating rates that even exceed 2019 levels. There is really nothing more than being very good at revenue management. There is nothing we really need to do strategically to say hey, look, the prices have to be x now. You know, prices will recover as demand recovers, and I'm sorry I forgot the second one. part of your question, oh, labor, on the labor side, yeah, yeah, look, labor markets are challenging right now. I mean, it's hard, you know, there's a lot of different factors going on, obviously, you have federal unemployment insurance. you know it was a really fantastic program that helped a lot of people and you know we really believe it was the right thing to do at the time, but right now we have this situation where the lawsuits are coming back and we have the ability to put people to work and there's a kind of short term, you know, so there's kind of a short term dynamic that's making it a little bit harder to find a job and when you find it you have to pay, you know you have to pay a little bit more to get it, but we think that those problems will subside as the economy recovers and we will get back to normal on that front too, okay we'll leave it there kevin jacobs

hilton

chief financial officer and president of Global Development Kevin really appreciates you taking the time to talk to us this morning .