Hilton (HLT) Banks on Unit-Expansion Efforts & Loyalty Program
Hilton Worldwide Holdings Inc. HLT is likely to benefit from a rise in leisure demand, improving business activity and unit-expansion efforts. Also, focus on its loyalty program bodes well. However, an uncertain macroeconomic environment is a concern.
Let’s delve deeper.
Growth Catalysts
Hilton is benefiting from solid revenue per available room (RevPAR) improvement. During the fourth-quarter 2023, system-wide comparable revenue per available room (RevPAR) rose 5.7% year over year (on a currency-neutral basis) owing to an increase in occupancy and average daily rate. RevPAR was up 13.5% from 2019 levels. The upside was primarily backed by strong international and group trends, solid leisure transient trends and improving business activity. It witnessed substantial RevPAR gains in Europe, Asia Pacific, the Middle East and Africa region, owing to strong leisure demand and recovery in international inbound travel. The company anticipates the momentum to persist for some time.
Hilton continues to drive unit growth to maintain its position as the fastest-growing global hospitality company. In 2023, Hilton opened 395 new hotels. It also achieved net unit growth of 4.9% year over year. The company anticipates positive momentum in signing starts and conversions, further driving openings, mainly bolstered by the introduction of the two brands, Spark and LivSmart Studios.
In 2024, the company expects net unit growth to accelerate to the higher end of 5.5% to 6%, with the potential for additional upside from an exclusive partnership with Small Luxury Hotels of the World. The collaboration will significantly expand the luxury distribution, integrating more than 500 hotels into the system.
One of the most extensive loyalty programs, Hilton Honors, created a precious asset for the company. Innovations like the Hilton Honors app continue to drive the program’s growth. As of Dec 31, 2023, the loyalty program had more than 180 million members. With membership levels increasing 20% on a year-over-year basis (as of fourth-quarter 2023), the company continues to outline opportunities to engage its Honors members through enhanced partnerships and points redemption offerings. The company intends to focus on new opportunities to drive customer engagement to reach pre-pandemic levels.
Concerns
Hilton — which shares space with Marriott International, Inc. MAR, Hyatt Hotels Corporation H and Choice Hotels International, Inc. CHH in the Zacks Hotels and Motels industry — are pursuant to uncertainties in financial markets on account of liquidity constraints. Financing conditions in certain regions have been challenging due to a rise in interest rates. Hilton is cautious in this regard as further challenges pave the path for the inability to access cash and the threat of new financing arrangements.
A Brief Review of the Other Stocks
Marriott is benefiting from solid leisure demand and recovery in business transient and group demand. It also benefited from its fee-driven, asset-light business model. During the fourth quarter of 2023, RevPAR for worldwide comparable system-wide properties jumped 7.2% (in cc) year over year thanks to a 3% increase in ADR and 2.6% in occupancy. Marriott is optimistic about its partnership with MGM Resorts and expects it to contribute to 2024 net room growth between 5.5% and 6%, year over year. Also, the emphasis on expansion initiatives, digital innovation and the loyalty program bodes well.
Hyatt is benefitting from solid leisure transient demand, recovery in business travel demand, increased system-wide group travel and a loyalty program. Also, the focus on new hotel openings and acquisition efforts bodes well. In 2024, Hyatt anticipates system-wide 2024 RevPAR to increase in the range of 3% and 5% year over year. Much optimism prevails on account of group bookings and confidence in the ongoing recovery of business transient demand, as well as the steady levels of leisure transient demand.
Choice Hotels is benefiting from synergies through the Radisson Hotels Americas integration and momentum in the pipeline of conversion projects. Also, the focus on continual expansion strategies through acquisitions and franchise agreements bodes well. The company intends to focus on prioritizing high-earning brand portfolio expansion, accelerating hotel openings through conversion capabilities, and strengthening platform capabilities to drive growth.
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Marriott International, Inc. (MAR) : Free Stock Analysis Report
Hyatt Hotels Corporation (H) : Free Stock Analysis Report
Choice Hotels International, Inc. (CHH) : Free Stock Analysis Report
Hilton Worldwide Holdings Inc. (HLT) : Free Stock Analysis Report
