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HLT or H: Which Hotel Stock is Better Placed at the Moment?
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The Hotels and Motels industry exhibited consistent performance, driven by significant growth in group room nights. Amanda Hite, president of STR, highlighted the U.S. hotel industry's robust performance in 2023, with a 5% increase in Revenue per Available Room (RevPAR) compared with the previous year’s levels. Occupancy rates steadily approached 2019 levels. Average Daily Rate (ADR) and RevPAR levels were consistently above the industry benchmark in nominal terms. The metrics demonstrate progress even when adjusted for inflation. Hite described the year as robust and deemed it a ‘normal’ period for the hotel industry. The Zacks Hotels and Motels industry has gained 22.2% in the past year compared with the S&P 500’s growth of 20.9%.
Hotel operators prioritize striking a balance between maximizing income and enhancing visitor satisfaction. Increased utilization of digital tools has been observed to improve customer service, boost online package sales, facilitate self-service bookings, strengthen infrastructure and provide real-time offers. This strategic approach — coupled with an emphasis on franchise agreements and asset-light business models — is expected to stimulate growth for hoteliers in the future.
Looking ahead to 2024, initial forecasts predict a gradual start that will progressively intensify toward a robust conclusion. Despite heightened geopolitical risks and persistent macroeconomic uncertainty, consumers are generally displaying resilience, fostering a positive outlook for forward bookings until the year-end across various global regions.
While RevPAR is expected to increase in 2024, the growth rate may be lower than that observed in 2023. Simultaneously, prospects for midweek travel remain uncertain, with some companies signaling adjustments to their business travel policies to control costs and align with sustainability goals. Outbound international leisure travel continues to surpass inbound travel, driven by a robust dollar and pent-up demand for international journeys.
In 2024, an increase in hotel listings is anticipated, attributed to factors such as the resolution of pipeline delays and the successful execution of post-pandemic business plans. With a reduced number of buyers and financial challenges, hotels are receiving fewer offers, contributing to a more traditional and less frenzied transaction environment.
Shares of Hilton have gained 22.3% in the past six months, while the same for Hyatt has increased 7.4%. The industry moved up 12.6% in the same time frame.
Hilton’s shares are benefiting from numerous strategic efforts to revive growth. The company is benefiting from a focus on unit expansion, hotel conversions, strategic partnerships and loyalty programs. It expects positive development trends to continue on the back of new development and conversion opportunities. For fourth-quarter 2023, management anticipates system-wide RevPAR to increase in the 4.5-5.5% band on a year-over-year basis.
Estimated Earnings & Revenues
Arguably, earnings growth is of utmost importance for determining a stock’s potential, as surging profit levels indicate strong prospects (and stock price gains).
For 2024, Hilton’s earnings per share (EPS) are expected to improve 14.9% year over year to $6.97. Moreover, year-over-year sales growth is expected at 7.6% in 2024. Hyatt’s 2024 earnings are likely to increase 32% year over year to $3.01, while sales are likely to rise 4.9% year over year.
Fundamentals
Hilton is actively pursuing unit growth to maintain its position as the fastest-growing global hospitality company. In the third quarter of 2023, the company opened 107 new hotels, contributing to a total room addition of nearly 16,000, marking a 22% year-over-year increase and a 12% sequential increase. As of Sep 30, 2023, Hilton's development pipeline includes nearly 3,190 hotels, with almost 457,300 rooms across 119 countries and territories, including 29 where it currently has no operational hotels. The company expects sustained growth in 2024 through continued expansion efforts.
Hilton anticipates benefiting from its strong loyalty program, which saw a 19% year-over-year increase in membership levels as of the third quarter of 2023. The company aims to engage Honors members further through enhanced partnerships and points redemption offerings, seeking to restore customer engagement to pre-pandemic levels. Hilton, having transformed into a capital-light operating business through spin-offs, envisions resilience as a fee-driven enterprise post-spinoff. The strategic focus involves expanding market share, units and free cash flow per share while maintaining a robust balance sheet and accelerating the return of capital. Hilton's unit growth is primarily financed by third parties, enabling substantial returns with minimal capital investment.
The positive outlook for Hyatt's demand growth in 2024 is supported by the continued robustness in leisure travel demand, a favorable pricing environment and ongoing airlift activities. The integration of Apple Leisure Group (ALG) yielded positive results, particularly in solid segmental performance, highlighted by net package RevPAR and increased membership contracts for ALG's Unlimited Vacation Club. Hyatt's focus on distribution capabilities, end-to-end booking processes, operational efficiency and integrated experiences with ALG programs positions the company optimistically for ALG's performance in 2024. Additionally, strategic acquisitions — such as Dream Hotel Group — known for its lifestyle hotel brands, empower Hyatt to expand its brand presence in popular destinations like Nashville, Hollywood, South Beach and New York City.
Our Take
Our comparative analysis shows that Hilton has the edge over Hyatt in terms of share price appreciation and projected EPS. However, the fundamentals of these companies look solid. Taking all factors into account, we believe Hilton is slightly better positioned than Hyatt at the moment.
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HLT or H: Which Hotel Stock is Better Placed at the Moment?
The Hotels and Motels industry exhibited consistent performance, driven by significant growth in group room nights. Amanda Hite, president of STR, highlighted the U.S. hotel industry's robust performance in 2023, with a 5% increase in Revenue per Available Room (RevPAR) compared with the previous year’s levels. Occupancy rates steadily approached 2019 levels. Average Daily Rate (ADR) and RevPAR levels were consistently above the industry benchmark in nominal terms. The metrics demonstrate progress even when adjusted for inflation. Hite described the year as robust and deemed it a ‘normal’ period for the hotel industry. The Zacks Hotels and Motels industry has gained 22.2% in the past year compared with the S&P 500’s growth of 20.9%.
Hotel operators prioritize striking a balance between maximizing income and enhancing visitor satisfaction. Increased utilization of digital tools has been observed to improve customer service, boost online package sales, facilitate self-service bookings, strengthen infrastructure and provide real-time offers. This strategic approach — coupled with an emphasis on franchise agreements and asset-light business models — is expected to stimulate growth for hoteliers in the future.
Looking ahead to 2024, initial forecasts predict a gradual start that will progressively intensify toward a robust conclusion. Despite heightened geopolitical risks and persistent macroeconomic uncertainty, consumers are generally displaying resilience, fostering a positive outlook for forward bookings until the year-end across various global regions.
While RevPAR is expected to increase in 2024, the growth rate may be lower than that observed in 2023. Simultaneously, prospects for midweek travel remain uncertain, with some companies signaling adjustments to their business travel policies to control costs and align with sustainability goals. Outbound international leisure travel continues to surpass inbound travel, driven by a robust dollar and pent-up demand for international journeys.
In 2024, an increase in hotel listings is anticipated, attributed to factors such as the resolution of pipeline delays and the successful execution of post-pandemic business plans. With a reduced number of buyers and financial challenges, hotels are receiving fewer offers, contributing to a more traditional and less frenzied transaction environment.
Leading hotel companies — Hilton Worldwide Holdings Inc. (HLT - Free Report) and Hyatt Hotels Corporation (H - Free Report) — are undertaking different initiatives to generate profits. With both companies carrying a Zacks Rank #3 (Hold), let’s analyze and find out the better option. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Price Performance
Image Source: Zacks Investment Research
Shares of Hilton have gained 22.3% in the past six months, while the same for Hyatt has increased 7.4%. The industry moved up 12.6% in the same time frame.
Hilton’s shares are benefiting from numerous strategic efforts to revive growth. The company is benefiting from a focus on unit expansion, hotel conversions, strategic partnerships and loyalty programs. It expects positive development trends to continue on the back of new development and conversion opportunities. For fourth-quarter 2023, management anticipates system-wide RevPAR to increase in the 4.5-5.5% band on a year-over-year basis.
Estimated Earnings & Revenues
Arguably, earnings growth is of utmost importance for determining a stock’s potential, as surging profit levels indicate strong prospects (and stock price gains).
For 2024, Hilton’s earnings per share (EPS) are expected to improve 14.9% year over year to $6.97. Moreover, year-over-year sales growth is expected at 7.6% in 2024. Hyatt’s 2024 earnings are likely to increase 32% year over year to $3.01, while sales are likely to rise 4.9% year over year.
Fundamentals
Hilton is actively pursuing unit growth to maintain its position as the fastest-growing global hospitality company. In the third quarter of 2023, the company opened 107 new hotels, contributing to a total room addition of nearly 16,000, marking a 22% year-over-year increase and a 12% sequential increase. As of Sep 30, 2023, Hilton's development pipeline includes nearly 3,190 hotels, with almost 457,300 rooms across 119 countries and territories, including 29 where it currently has no operational hotels. The company expects sustained growth in 2024 through continued expansion efforts.
Hilton anticipates benefiting from its strong loyalty program, which saw a 19% year-over-year increase in membership levels as of the third quarter of 2023. The company aims to engage Honors members further through enhanced partnerships and points redemption offerings, seeking to restore customer engagement to pre-pandemic levels. Hilton, having transformed into a capital-light operating business through spin-offs, envisions resilience as a fee-driven enterprise post-spinoff. The strategic focus involves expanding market share, units and free cash flow per share while maintaining a robust balance sheet and accelerating the return of capital. Hilton's unit growth is primarily financed by third parties, enabling substantial returns with minimal capital investment.
The positive outlook for Hyatt's demand growth in 2024 is supported by the continued robustness in leisure travel demand, a favorable pricing environment and ongoing airlift activities. The integration of Apple Leisure Group (ALG) yielded positive results, particularly in solid segmental performance, highlighted by net package RevPAR and increased membership contracts for ALG's Unlimited Vacation Club. Hyatt's focus on distribution capabilities, end-to-end booking processes, operational efficiency and integrated experiences with ALG programs positions the company optimistically for ALG's performance in 2024. Additionally, strategic acquisitions — such as Dream Hotel Group — known for its lifestyle hotel brands, empower Hyatt to expand its brand presence in popular destinations like Nashville, Hollywood, South Beach and New York City.
Our Take
Our comparative analysis shows that Hilton has the edge over Hyatt in terms of share price appreciation and projected EPS. However, the fundamentals of these companies look solid. Taking all factors into account, we believe Hilton is slightly better positioned than Hyatt at the moment.