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Here's Why Investors Should Hold on to Hilton (HLT) Stock Now
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Hilton Worldwide Holdings Inc. (HLT - Free Report) continues to focus on unit expansion to drive growth. Moreover, the company has signed several deals to expand its portfolio of resorts. However, dismal RevPAR due to the coronavirus pandemic remains a major concern. In the past six months, shares of the company have gained 38.4%, compared with the industry’s rally of 40.3%. Let’s delve deeper.
Expansion Efforts
Despite the coronavirus pandemic, the company continues to focus on expansion efforts to drive growth. In 2020, Hilton opened nearly 410 new hotels. It achieved net unit growth of 56,000 rooms, marking an improvement of 5.1% from the prior-year quarter. During the fourth quarter, the company witnessed year-over-year growth of 30% in its hotel openings on the back of new development projects in China.
As of Dec 31, 2020, Hilton's development pipeline comprised nearly 2,570 hotels, with roughly 397,000 rooms across 116 countries and territories — including 31 countries and territories where it currently does not have any running hotels. Moreover, 233,000 rooms in the development pipeline were located outside the United States and 204,000 rooms were under construction.
Luxury Deals
During fourth-quarter 2020, the company signed several deals to expand its portfolio of resorts. Notably, this includes expansion agreements of Curio Collection in Mexico and Tapestry Collection in Portugal. It also launched the LXR brand in the United States, with the opening of Oceana Santa Monica. Going forward, the company announced plans to launch LXR brand in Seychelles (with the opening of Mango House Seychelles) and Bali. Moreover, Hilton is focusing on hotel conversion opportunities to mitigate the impact of construction delays caused by the pandemic. To this end, the company opened Waldorf Astoria, Monarch Beach Resort and the Hilton Vancouver Downtown through hotel conversions.
Recovery in Global Markets
With restrictions being lifted and more than 97% of its properties operating, Hilton’s business is likely to pick up on improved demand post the summer period. The company is also likely to benefit from gradual improvement in travel demand courtesy of accelerated vaccine distributions and easing of government restrictions. For first-quarter 2021, the company expects a rise in demand in the United States, partially offset by lower recoveries in Asia Pacific and Europe. Also, it anticipates reopening of all systemwide rooms by second-quarter 2021. Notably, rise in leisure demand, and rebound in corporate transient and group businesses are likely to benefit the company in the days ahead.
Concerns
During the fourth quarter, the company experienced significant declines in RevPAR in all regions, primarily due to decline in occupancy resulting from the COVID-19 pandemic. RevPAR was down across all regions, with the weakest results in Europe. For the three months ended Dec 31, 2020, system-wide comparable revenue per available room (RevPAR) plunged 59.2% on a currency-neutral basis due to a decline in occupancy, and average daily rate (ADR). The downtrend was caused by decline in travel and tourism.
Although 97% of the properties are in operation, the company is witnessing significantly lower occupancy rates compared with the pre-pandemic levels. Due to rise in coronavirus cases in Europe, the company’s positive summer momentum in the region has been hindered.
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Here's Why Investors Should Hold on to Hilton (HLT) Stock Now
Hilton Worldwide Holdings Inc. (HLT - Free Report) continues to focus on unit expansion to drive growth. Moreover, the company has signed several deals to expand its portfolio of resorts. However, dismal RevPAR due to the coronavirus pandemic remains a major concern. In the past six months, shares of the company have gained 38.4%, compared with the industry’s rally of 40.3%. Let’s delve deeper.
Expansion Efforts
Despite the coronavirus pandemic, the company continues to focus on expansion efforts to drive growth. In 2020, Hilton opened nearly 410 new hotels. It achieved net unit growth of 56,000 rooms, marking an improvement of 5.1% from the prior-year quarter. During the fourth quarter, the company witnessed year-over-year growth of 30% in its hotel openings on the back of new development projects in China.
As of Dec 31, 2020, Hilton's development pipeline comprised nearly 2,570 hotels, with roughly 397,000 rooms across 116 countries and territories — including 31 countries and territories where it currently does not have any running hotels. Moreover, 233,000 rooms in the development pipeline were located outside the United States and 204,000 rooms were under construction.
Luxury Deals
During fourth-quarter 2020, the company signed several deals to expand its portfolio of resorts. Notably, this includes expansion agreements of Curio Collection in Mexico and Tapestry Collection in Portugal. It also launched the LXR brand in the United States, with the opening of Oceana Santa Monica. Going forward, the company announced plans to launch LXR brand in Seychelles (with the opening of Mango House Seychelles) and Bali. Moreover, Hilton is focusing on hotel conversion opportunities to mitigate the impact of construction delays caused by the pandemic. To this end, the company opened Waldorf Astoria, Monarch Beach Resort and the Hilton Vancouver Downtown through hotel conversions.
Recovery in Global Markets
With restrictions being lifted and more than 97% of its properties operating, Hilton’s business is likely to pick up on improved demand post the summer period. The company is also likely to benefit from gradual improvement in travel demand courtesy of accelerated vaccine distributions and easing of government restrictions. For first-quarter 2021, the company expects a rise in demand in the United States, partially offset by lower recoveries in Asia Pacific and Europe. Also, it anticipates reopening of all systemwide rooms by second-quarter 2021. Notably, rise in leisure demand, and rebound in corporate transient and group businesses are likely to benefit the company in the days ahead.
Concerns
During the fourth quarter, the company experienced significant declines in RevPAR in all regions, primarily due to decline in occupancy resulting from the COVID-19 pandemic. RevPAR was down across all regions, with the weakest results in Europe. For the three months ended Dec 31, 2020, system-wide comparable revenue per available room (RevPAR) plunged 59.2% on a currency-neutral basis due to a decline in occupancy, and average daily rate (ADR). The downtrend was caused by decline in travel and tourism.
Although 97% of the properties are in operation, the company is witnessing significantly lower occupancy rates compared with the pre-pandemic levels. Due to rise in coronavirus cases in Europe, the company’s positive summer momentum in the region has been hindered.
Hilton, which shares space with Marriott Vacations Worldwide Corporation (VAC - Free Report) , Marriott International, Inc. (MAR - Free Report) and Hyatt Hotels Corporation (H - Free Report) in the Zacks Hotels and Motels industry — currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Time to Invest in Legal Marijuana
If you’re looking for big gains, there couldn’t be a better time to get in on a young industry primed to skyrocket from $17.7 billion back in 2019 to an expected $73.6 billion by 2027.
After a clean sweep of 6 election referendums in 5 states, pot is now legal in 36 states plus D.C. Federal legalization is expected soon and that could be a still greater bonanza for investors. Even before the latest wave of legalization, Zacks Investment Research has recommended pot stocks that have shot up as high as +285.9%
You’re invited to check out Zacks’ Marijuana Moneymakers: An Investor’s Guide. It features a timely Watch List of pot stocks and ETFs with exceptional growth potential.
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