The Hilton logo is displayed on a screen on the floor of the New York Stock Exchange (NYSE) in New York, U.S., May 29, 2019. REUTERS/Brendan McDermid

By Aishwarya Jain

(Reuters) -Hilton Worldwide cut its 2025 room revenue growth forecast due to softness in U.S. travel demand, but its shares rallied as the company boosted its expectations for new hotel additions, helped by resilient demand from wealthier customers.

Travel demand in the U.S. has ebbed, particularly among middle-income and lower-income consumers due to persistent worries about inflation.

Those pressures were evident in Hilton's earnings, which showed better results for its luxury properties than its more affordable options, and stood testimony to the divergent fortunes of U.S. consumers.

"Luxury is performing really well, and we're going to continue to focus on luxury," CEO Christopher Nassetta told investors on Wednesday.

Consumer-facing companies have noted an ongoing divergence between spending from those lower down on the income ladder and the more affluent, as the latter continue to spend, while people with less disposable income have tightened their belts.

Hilton's revenue per available room (RevPAR) at its luxury properties like the LXR and Conrad recorded strong growth, while more affordable brands such as Hampton and Hilton Garden Inn declined.

Its third-quarter revenue of $3.12 billion exceeded the Wall Street average estimate for $3.01 billion, according to data compiled by LSEG.

Mid-market and budget business has declined, though Nassetta said that he believes that "the relative performance gap between mid-market and luxury will close in a meaningful way over the next couple of years."

The McLean, Virginia-based company now expects full-year RevPAR to grow up to 1%, compared with its earlier forecast for an up to 2% rise.

ROOM REVENUE FALLS

Hilton's room revenue in the U.S., which accounts for roughly 65% of the company's total rooms, fell 2.3% during the third quarter.

However, the company boosted its expectations for hotel additions, also known as net unit growth. That helped lift shares, which were up nearly 5% in early trading.

The company now expects net unit growth (NUG), or new hotel additions, to rise 6.5% to 7% in 2025, compared with its previous forecast of 6% to 7% growth.

"The NUG upgrade in the face of RevPAR and development headwinds should be taken well," Richard Clarke, analyst at Bernstein said.

The hotel operator also benefited from a rise of nearly 6% in franchise and licensing fees.

CFO Kevin Jacobs said on the earnings call that Hilton was seeing an effect from the ongoing government shutdown, which had been factored into its forecast.

"Even if the government shutdown keeps going, we think we'll be within the range of our forecast," he said.

It sees 2025 adjusted profit per share of $7.97 to $8.06, higher than the $7.83 to $8 per share previously forecast.

The Waldorf-Astoria parent's adjusted profit of $2.11 per share beat analysts' estimates of $2.06.

(Reporting by Aishwarya Jain in Bengaluru; Editing by Shinjini Ganguli)