Hilton Worldwide Holdings Inc. (HLT - Free Report) , through a strategic partnership with Country Garden Hotels Group, is lining up new hotel openings. The Country Garden properties under this agreement will be managed by Hilton’s DoubleTree by Hilton and Hilton Garden Inn brands. Hilton’s partnership with Country Garden, China’s largest property developer will enable the brand to strengthen its hold in China.
In fact, the move is in line with Hilton’s strategic efforts to capitalize the flourishing tourism and leisure industry in China. Per a report by World Tourism Economy, the number of inbound tourist arrivals in China increased to 11.88 billion in 2017 compared with 11.12 billion in 2016 and the upside trend is likely to continue in 2018 as well.
Hilton has a portfolio of 470 properties, either operating or under construction in China. In April, the hotelier further expanded its presence in the country by opening Hampton by Hilton Shunde Longjiang, Foshan and the Hampton by Hilton Suzhou Xiangcheng District.
Continual Expansion as Major Growth Driver
The recent move underscores Hilton’s expansion strategy that is expected to put the company on a continued growth trajectory. In a bid to maintain its position as the fastest-growing global hospitality company, Hilton is continuing to drive unit growth. In 2017, Hilton witnessed net unit growth of 18,400 rooms. Also, in the first quarter of 2018, the company achieved net unit growth of 7,100 rooms and witnessed a 7% increase from the prior-year quarter. For 2018, the company projects an approximate 6.5% net unit growth. It also continues to have more rooms under construction in Europe, the Middle East and Asia Pacific than any other hotel chain. The company expects greater international expansion in 2018.
Hilton’s broad geographic diversity lowers the effect of volatility in individual markets. Evidently, Mexico and Canada have been experiencing strong leisure demand, leading to solid RevPAR growth. Meanwhile, strength in China and Japan have led to solid RevPAR growth in the Asia Pacific region as well. Notably, the company continues to make great progress in its luxury development strategy, anticipating double-digit luxury growth in the next several years. Hilton’s new brands including Home2 Suites, Tru by Hilton and Tapestry Collection are also gaining momentum globally.
Expansion Fends Off Competition
Hilton’s relentless expansion also helps the company in strategizing against a growing competition in the industry. The hotel industry is highly competitive, as major hospitality chains along with their well-established and recognized brands are continuously expanding their global presence. Hilton is continuously facing intense competition from large hotel chains like Marriott (MAR - Free Report) and Hyatt (H - Free Report) . It is also facing competition from new channels of distribution in the travel industry. Additional sources of competition include large companies that offer online travel services as part of their business model such as Alibaba (BABA - Free Report) . Hilton, therefore, through its disciplined, strategic operations and expansion is trying to navigate stiff competition.
Driven by these strategic efforts and a robust brand image, this Zacks Rank #3 (Hold) company’s shares have increased 23.4% in the past year, outperforming the industry’s rally of 15.6%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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