Hilton delivered mixed signals on Wednesday about the health of U.S. hotel demand, with executives noting that the second quarter was soft. But the hotel giant maintained confidence in its expansion plans.

During the quarter, Hilton’s revenue per available room (RevPAR) decreased by 0.5%, primarily due to declines in occupancy. Yet for the full year, Hilton maintained its RevPAR growth forecast of between 0% and 2%.

Hilton president and CEO Chris Nassetta painted a picture of a sluggish period, but quickly pivoted to discussing encouraging signs for the near future.

“We said relatively flat, which means it could be a little up, a little down. It was a little down,” he said. But he also said he saw several “green shoots” that he believed would drive stronger demand over the “next 2 or 3 years.”

Policy uncertainty in Washington this spring, related to trade deals, taxes, and regulations, led to lower-than-expected hotel bookings in the quarter, especially by leisure travelers and large corporations.

“We believe the economy in our largest market [the U.S.] is set up for better growth over the intermediate term, which should accelerate travel demand and, when paired with low industry supply growth, unlock stronger revenue per available room growth,” Nassetta said. “Supply growth in the industry is at the lowest levels that we’ve really ever seen.”

“A more favorable regulatory environment, certainty in tax reform, expected settling down on global trade policy, continuation of very healthy corporate profits, and significant investments across a multitude of industries, including AI and AI-related core infrastructure investment, should accelerate economic growth and unlock meaningful increases in travel demand,” he said.”

The quarter revealed uneven travel patterns across customer segments.

Leisure travel grew 1% as an extended spring break period and favorable year-over-year comparisons supported demand.

However, business travel declined by 2%, pressured by reduced government spending, weaker international visitor numbers, and what Nassetta described as “broader economic uncertainty.”

Group bookings remained roughly flat, with corporate meetings offsetting weakness in convention business and social events.

Visits to the U.S. from Canada and Mexico were down. However, the countries combined drive only about 1.5% of Hilton’s total revenue. The company benefited from increased visitation from abroad as the U.S. dollar weakened.

Looking ahead, the hotel operator forecasted that its RevPAR would remain flat to slightly negative in the third quarter, partly due to holiday calendar shifts. That range is below the analyst consensus that Hilton’s RevPAR would rise 1.2% year-over-year.

Hilton anticipates improvement in the fourth quarter, partly driven by easier year-over-year comparisons with last year’s dampened demand from the U.S. presidential election.

Hilton reported “positive momentum” in corporate lead volumes and said group bookings for 2026 and 2027 were up in the high single digits.

While Hilton’s hotel development pipeline hit a record high (510,000 rooms), the pace of openings has slackened. Excluding hotels acquired through recent deals, Hilton’s net room growth was up only 5.4% year-over-year.

“[Hilton] will need a record second half to even hit the bottom end of the 6% to 7% guidance for the year,” noted Richard Clarke in a flash report for Bernstein Research.

Executives said Monday they “remain confident” in the company’s “ability to deliver net unit growth between 6-7% for the next several years.”

“However, we expect questions on how this organic growth rate can be achieved in 2026,” wrote Truist Securities analyst C. Patrick Scholes in a flash report. “The pipeline only grew 4% year-over-year, versus the 7.2% growth rate in the first quarter, fourth quarter 2024’s +8%, and the +15% in the same quarter a year ago.

Nassetta insisted the company will hit its target range for hotel development.

“I’ve been saying we will be in the 6% to 7% range, and I’m a little bit more emphatic,” Nassetta said.

The CEO noted that the company’s starts on hotel projects “are going to be up 16% to 17% this year, and once they start, almost 100% of the time, they finish.”

The CEO teased that the group would add more brands to its current 24.

“We’re going to have 2 or 3 more brands,” Nassetta said, noting they’ll likely be in the “upscale or upscale plus areas of lifestyle.”

One of these may be a soft brand. “We’re putting the finishing touches on another collection brand in lifestyle that is sort of in the Tapestry zone, but just for more unique assets.”

Despite the weakness in RevPAR, Hilton generated a net income of $442 million on $1.3 billion in revenue (after reimbursing money to hotel owners) in the quarter. Adjusted EBITDA grew 10% to $1 billion.

“Hilton Honors continues to perform extraordinarily well with more than 226 million members, up 16% year-over-year, with membership now evenly split between the U.S. and international travelers,” Nassetta said.

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