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Hilton Expands Motto by Hilton in Georgia, Eyes RevPAR Growth

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Hilton Worldwide Holdings Inc. (HLT - Free Report) announced that its latest lifestyle brand, Motto by Hilton, signed an agreement to open its first U.S. property in Atlanta, GA. The brand partnered with Lucror Resources and Sixty West Funds to introduce this contemporary hotel.

Located in 40 Boulevard NE, this 125-roomed lifestyle hotel caters to contemporary tastes of customers, with highly self-reliant services and modern amenities. The new hotel will also be part of Hilton Honors, the company’s loyalty program.

The move not only underscores Hilton’s sincere focus on expansion and strong brand building but is also its way of countering intense competition from the likes of Marriott (MAR - Free Report) , Hyatt (H - Free Report) and Choice Hotels (CHH - Free Report) .

As it is, Hilton is known for its scale, size, commercial platform and industry-leading brands. The company’s premier brands provide distinguished customer-centric services to preserve the brand image. Backed by such robust brand image, shares of Hilton have gained 6.5% in the past year against the industry’s decline of 14.6%.

 

Continual Expansion — Major Growth Driver

In a bid to maintain the position as the fastest-growing global hospitality company, Hilton is continuing to drive unit growth.  In the first quarter of 2019, the company opened 85 hotels. It also achieved net unit growth of 10,000 rooms, indicating roughly 41% increase from the prior-year quarter. In 2018, Hilton launched over 450 hotels, taking room count to more than 66,000, and achieved net unit growth of nearly 57,000 rooms, marking an increase of 10% from the same period of 2017.

As of Mar 31, 2019, Hilton's development pipeline comprised more than 2,480 hotels, with more than 371,000 rooms throughout 108 countries and territories, including 37 countries and territories, where it currently does not have any running hotels. Moreover, 200,000 rooms in the development pipeline were located outside the United States and 193,000 rooms were under construction.

Hilton’s broad geographic diversity lowers the effect of volatility in individual markets. More than half of the company’s pipeline is located outside the United States. More than 30% of the pipeline is located in the Asia Pacific region, where demand has been high. Also, a growing middle-class population in China is creating demand for hospitality services.

Further, Europe’s RevPAR trends are being supported by favorable exchange rates as well as strength in regions, including Spain, the U.K., Germany, Turkey and more. 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, Tapestry Collection, are also gaining momentum globally.

Our Take

We believe that the above move will help Hilton significantly to boost its revenue per available room (RevPAR) growth. In the first quarter of 2019, system-wide comparable RevPAR increased 1.8% (on a currency-neutral basis) year over year, driven by growth in ADR as well as occupancy rate.

Also, addition of the hotel in Hilton Honors will drive occupancy. In fact, the loyalty program increased occupancy in 2018 by 20%. The Honors now account for roughly 60% of system-wide occupancy, which is up 170 basis points for the year.

Hilton currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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