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Hilton (HLT) Banks on Unit Expansion Efforts, RevPAR Dismal

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Hilton Worldwide Holdings Inc. (HLT - Free Report) is likely to benefit from expansion efforts, luxury development strategy and digital efforts. Also, its focus on conversion opportunities bodes well. However, a decline in revenue per available room (RevPAR) from the pre-pandemic levels is a headwind.

Let’s delve deeper.

Growth Catalysts

To maintain its position as the fastest-growing global hospitality company, Hilton continues to drive unit growth. During second-quarter 2022, Hilton opened 91 new hotels. It also achieved net unit growth of nearly 13,300 rooms. During the quarter, the company unveiled properties, including Waldorf Astoria Washington, D.C. and the Hotel Marcel New Haven, Tapestry Collection by Hilton. Additionally, it announced the opening of Hilton Maldives Amingiri, the Conrad Los Angeles and the Lost Property St. Paul's London (a Curio Collection hotel) in July. For 2022, the company expects net unit growth of 5%.

Hilton continues to progress in its luxury development strategy. During the second quarter of 2022, the company boosted its luxury portfolio with the openings of Conrad properties in Nashville and Sardinia. It also announced the opening of Conrad Los Angeles in California (July 2022). Apart from this, the company emphasized the expansion of its luxury line-up with the signings of the Waldorf Astoria Sydney and Waldorf Astoria Kuala Lumpur.

Hilton is focused on hotel conversion opportunities to mitigate the impact of construction delays caused by the pandemic. The company has signed conversion deals with Curio and Tapestry, covering destinations like the Galapagos Islands, San Sebastian Spain, Maui and Sonoma County, California. Also, it has progressed with DoubleTree expansion with new conversion properties across France, Germany and the Netherlands. During the second quarter of 2022, conversion openings totaled more than 3,400 rooms and represented nearly 24% of total openings. Also, it unveiled Waldorf Astoria Washington D.C. under the conversion opening. The company expects positive development trends to continue on the back of new development and conversion opportunities.

One of the largest loyalty programs, Hilton Honors, created an extremely valuable asset for the company. Innovations like the Hilton Honors app continue to drive the program’s growth. As of Jun 30, 2022, the loyalty program had more than 139 million members. With membership levels increasing 17% on a year-over-year basis (as of second-quarter 2022), the company continues to outline opportunities to engage its Honors members through enhanced partnerships and points redemption offerings. Hilton intends to focus on new opportunities to drive customer engagement to reach pre-pandemic levels.


Hilton — which shares space with Marriott International, Inc. (MAR - Free Report) , Marriott Vacations Worldwide Corporation (VAC - Free Report) and Hyatt Hotels Corporation (H - Free Report) in the Zacks Hotels and Motels industry — has been affected by the coronavirus crisis. During the second quarter of 2022, strict COVID policies and lockdowns in Shanghai and Beijing put pressure on travel demand. Although most properties have lifted or eased restrictions, RevPar is still lagging behind pre-pandemic levels. In 2022, the company anticipates RevPAR to decline 1-5% from 2019 levels. Uncertainty related to pandemic-induced implications is a concern.

A Brief Review of the Other Stocks

Marriott is benefiting from its focus on expansion initiatives, digital innovation and the loyalty program. The company is gaining from robust leisure demand and business and cross-border travel improvements. During second-quarter 2022, the company witnessed solid demand in the United States, Canada, the Middle East and Africa region. Also, it reported a strong RevPAR recovery in Europe. With global trends improving, the company expects the recovery momentum to continue in future periods.

Marriott Vacations continues to witness robust recovery during second-quarter 2022. While both occupancies and tours are witnessing growth in the second quarter, VPGs remain well above the 2019 levels. The company reported benefits from its development and rental businesses. During the second quarter of 2022, the company reported solid occupancies with respect to its Aqua-Aston business. Also, it reported a solid recovery in domestic markets (Hawaii) and Asia-Pacific. Going forward, much optimism prevails as the company noted increasing willingness among customers to resume travel.

Hyatt is benefitting from a gradual increase in demand, new hotel openings and acquisition initiatives. Also, increased focus on loyalty programs bodes well. With continued ease-of-travel restrictions and improvements in airlines, the company noted solid demand from both leisure and business travelers alike. Going forward, the company is optimistic with respect to the Apple Leisure Group acquisition on account of robust business and technological optimization.

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