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Here's Why You Should Retain Hilton (HLT) Stock for Now
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Hilton Worldwide Holdings Inc. (HLT - Free Report) is likely to benefit from solid revenue per available room (RevPAR) growth, expansion efforts and hotel conversion opportunities. This and the emphasis on the loyalty program bode well. However, an uncertain macroeconomic environment and rising interest rates are a concern.
Let’s delve deeper.
Growth Catalysts
Hilton is benefiting from solid leisure transient trends and steady recovery in business transient and group travel. During second-quarter 2023, system-wide comparable revenue per available room (RevPAR) increased 12.1% year over year (on a currency-neutral basis), owing to increased occupancy and average daily rate. Also, RevPAR was up 9.3% from 2019 levels. The upside was primarily backed by strong demand growth in APAC, solid leisure transient trends and improving business activity. The company witnessed substantial RevPAR gains in Europe, the Middle East and Africa region, owing to solid leisure demand and recovery in international inbound travel. Hilton anticipates system-wide 2023 RevPAR to increase between 10% and 12% year over year compared with the previous projections of 8% and 11%.
Hilton continues to drive unit growth to remain the fastest-growing global hospitality company. During second-quarter 2023, Hilton opened 92 new hotels. It also achieved net unit growth of nearly 11,200 rooms. During the quarter, the company unveiled its 2,900th Hampton Inn and 600th Home2 Suites property. It also announced the opening of the Hilton Okinawa, Miyako Island Resort in Japan and Conrad Shenzhen in China. It also reported a solid expansion of Hilton Garden Inn with signings of approximately 3,700 HCI rooms in China. This apart, the company signed agreements for properties, including Tapestry Hotel (on the French Riviera) and Curio (in Croatia).
Increased focus on hotel conversion opportunities bodes well. During the second quarter of 2023, the company reported solid conversions driven by strength in signings across Europe and Asia Pacific. The company reported strong developers' interest in the premium economy conversion brand — Spark by Hilton. With more than 400 deals in hand (in various stages of negotiation), the company is optimistic in this regard and anticipates hotel openings in the latter part of 2023. The company expects positive development trends to continue on the back of new development and conversion opportunities.
One of the most extensive loyalty programs, Hilton Honors, created a precious asset for the company. Innovations like the Hilton Honors app continue to drive the program’s growth. As of Jun 30, 2023, the loyalty program had more than 165 million members, reflecting a rise of 20% year over year. During the quarter, the company stated that Honors members accounted for 65% of the occupancy, up 2 points year over year. The company focuses on opportunities to engage its Honors members through enhanced partnerships and points redemption offerings.
Concerns
Image Source: Zacks Investment Research
Shares of Hilton have gained 8.2% in the past three months compared with the industry’s 10% rise. Challenging macroeconomic factors, including inflation, supply chain disruptions and instability in the banking system primarily drove the downside.
The company’s operations are pursuant to financial market uncertainties due to liquidity constraints. Financing conditions in certain regions have been challenging due to rising interest rates. The company is cautious in this regard as further challenges pave a path for inability to access cash and threatening of new financing arrangements.
The Zacks Consensus Estimate for RCL’s 2023 sales and EPS indicates a rise of 54.5% and 180.3%, respectively, from the year-ago period’s levels.
Trip.com Group Limited (TCOM - Free Report) flaunts a Zacks Rank #1. The company has a trailing four-quarter earnings surprise of 147.9%, on average. Shares of TCOM have increased 40.2% in the past year.
The Zacks Consensus Estimate for TCOM’s 2023 sales and EPS indicates a rise of 104.9% and 537.9%, respectively, from the year-ago period’s levels.
Skechers U.S.A., Inc. (SKX - Free Report) sports a Zacks Rank #1. The company has a trailing four-quarter earnings surprise of 39.1%, on average. Shares of SKX have increased 32.9% in the past year.
The Zacks Consensus Estimate for SKX’s 2023 sales and EPS indicates a rise of 8.5% and 41.2%, respectively, from the year-ago period’s levels.
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Here's Why You Should Retain Hilton (HLT) Stock for Now
Hilton Worldwide Holdings Inc. (HLT - Free Report) is likely to benefit from solid revenue per available room (RevPAR) growth, expansion efforts and hotel conversion opportunities. This and the emphasis on the loyalty program bode well. However, an uncertain macroeconomic environment and rising interest rates are a concern.
Let’s delve deeper.
Growth Catalysts
Hilton is benefiting from solid leisure transient trends and steady recovery in business transient and group travel. During second-quarter 2023, system-wide comparable revenue per available room (RevPAR) increased 12.1% year over year (on a currency-neutral basis), owing to increased occupancy and average daily rate. Also, RevPAR was up 9.3% from 2019 levels. The upside was primarily backed by strong demand growth in APAC, solid leisure transient trends and improving business activity. The company witnessed substantial RevPAR gains in Europe, the Middle East and Africa region, owing to solid leisure demand and recovery in international inbound travel. Hilton anticipates system-wide 2023 RevPAR to increase between 10% and 12% year over year compared with the previous projections of 8% and 11%.
Hilton continues to drive unit growth to remain the fastest-growing global hospitality company. During second-quarter 2023, Hilton opened 92 new hotels. It also achieved net unit growth of nearly 11,200 rooms. During the quarter, the company unveiled its 2,900th Hampton Inn and 600th Home2 Suites property. It also announced the opening of the Hilton Okinawa, Miyako Island Resort in Japan and Conrad Shenzhen in China. It also reported a solid expansion of Hilton Garden Inn with signings of approximately 3,700 HCI rooms in China. This apart, the company signed agreements for properties, including Tapestry Hotel (on the French Riviera) and Curio (in Croatia).
Increased focus on hotel conversion opportunities bodes well. During the second quarter of 2023, the company reported solid conversions driven by strength in signings across Europe and Asia Pacific. The company reported strong developers' interest in the premium economy conversion brand — Spark by Hilton. With more than 400 deals in hand (in various stages of negotiation), the company is optimistic in this regard and anticipates hotel openings in the latter part of 2023. The company expects positive development trends to continue on the back of new development and conversion opportunities.
One of the most extensive loyalty programs, Hilton Honors, created a precious asset for the company. Innovations like the Hilton Honors app continue to drive the program’s growth. As of Jun 30, 2023, the loyalty program had more than 165 million members, reflecting a rise of 20% year over year. During the quarter, the company stated that Honors members accounted for 65% of the occupancy, up 2 points year over year. The company focuses on opportunities to engage its Honors members through enhanced partnerships and points redemption offerings.
Concerns
Image Source: Zacks Investment Research
Shares of Hilton have gained 8.2% in the past three months compared with the industry’s 10% rise. Challenging macroeconomic factors, including inflation, supply chain disruptions and instability in the banking system primarily drove the downside.
The company’s operations are pursuant to financial market uncertainties due to liquidity constraints. Financing conditions in certain regions have been challenging due to rising interest rates. The company is cautious in this regard as further challenges pave a path for inability to access cash and threatening of new financing arrangements.
Zacks Rank & Key Picks
Hilton currently carries a Zacks Rank #3 (Hold).
Some better-ranked stocks in the Zacks Consumer Discretionary sector are:
Royal Caribbean Cruises Ltd. (RCL - Free Report) sports a Zacks Rank #1 (Strong Buy). RCL has a trailing four-quarter earnings surprise of 28.5%, on average. Shares of RCL have gained 84.4% in the past year. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for RCL’s 2023 sales and EPS indicates a rise of 54.5% and 180.3%, respectively, from the year-ago period’s levels.
Trip.com Group Limited (TCOM - Free Report) flaunts a Zacks Rank #1. The company has a trailing four-quarter earnings surprise of 147.9%, on average. Shares of TCOM have increased 40.2% in the past year.
The Zacks Consensus Estimate for TCOM’s 2023 sales and EPS indicates a rise of 104.9% and 537.9%, respectively, from the year-ago period’s levels.
Skechers U.S.A., Inc. (SKX - Free Report) sports a Zacks Rank #1. The company has a trailing four-quarter earnings surprise of 39.1%, on average. Shares of SKX have increased 32.9% in the past year.
The Zacks Consensus Estimate for SKX’s 2023 sales and EPS indicates a rise of 8.5% and 41.2%, respectively, from the year-ago period’s levels.