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Hilton Expands Curio Collection Brand, Eyes Top-Line Growth

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Hilton Worldwide Holdings Inc. (HLT - Free Report) announced that its Curio Collection by the Hilton brand is adding five hotels in Washington, New Mexico, California and Utah. Since the western part of the United States is sought out by the majority of travelers and tourists, this upper upscale collection brand is expanding presence in the area.

This move not only suggests Hilton’s efforts to expand its upper upscale portfolio but also shows how it relies on overall expansion to drive top-line growth and counter competition from the likes of Marriott (MAR - Free Report) and Hyatt (H - Free Report) .

As it is, Hilton’s scale, size, commercial platform and industry-leading brands helped it preserve its brand image. The company’s shares have gained 38.1% so far this year, outperforming the industry’s 25.8% rally.



Expansion — Major Growth Driver

In a bid to maintain position as the fastest-growing global hospitality company, Hilton is continuing to drive unit growth.  During 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. During 2018, Hilton launched over 450 hotels, taking its 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 Hilton 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.

Our Take

We believe that the addition of the latest hotels in Hilton’s Curio Collection will help it witness further top-line growth. In the first quarter of 2019, the company’s revenues increased 6.3% from the year-ago quarter on higher comparable revenue per available room (RevPAR). System-wide comparable RevPAR increased 1.8%, driven by growth in ADR as well as occupancy rate.

Hilton, which also shares the same space with Wyndham Destinations (WYND - Free Report) , 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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