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Here’s Why Hilton (HLT) Focused on All Suites Brand in Q2


Hilton Worldwide Holdings Inc. HLT announced that its All Suites brands opened 34 hotels in the second quarter of 2018, taking the brand’s total property count to nearly 1,000. In the reported quarter, Hilton’s All Suites brand forayed into quite a few convention center submarkets. The brands also signed 35 deals to add properties in its pipeline.

Notably, Hilton’s All Suites brand comprises Embassy Suites, Homewood Suites and Home2 Suites. Embassy Suites is Hilton’s full-service and upscale brand while Homewood Suites is an upscale extended stay hotel brand. Home2 Suites, on the other hand, has a mid-tier extended stay concept. In the second quarter, each of these brands continued to gain momentum by aiding unit growth.

Driven by such a robust brand image, Hilton’s shares have increased 16.2% in the past year, outperforming the industry’s rally of 2%.

Brand Expansion as Growth Driver

Expansion of All Suites brand underscores Hilton’s consistent efforts in driving its growth momentum. In a bid to maintain its position as the fastest-growing global hospitality company, Hilton is continuing to drive unit growth.

During the second quarter, Hilton opened 123 hotels, taking room count to 17,100. The company achieved net unit growth of 15,800 rooms, indicating an 18% increase from the prior-year quarter. For 2018, it projects approximately 6.5% net unit growth. It also continues to have more rooms under construction in Europe, the Middle East and the Asia Pacific compared with any other hotel chain. The company expects greater international expansion in 2018.

Capitalizing on Demand & Counter Competition

Notably, per the Global Business Travel Association, the business travel market is gaining traction and is expected to reach $1.6 trillion by 2020. Cashing on an upbeat industry trend, Hilton is continuously expanding its pipeline beyond familiar itineraries. The move explains how the company is uniformly expanding all of its brands to cater to the need of varied travelers.

We also believe that this is Hilton’s way of fending off intense competition from big hotel chains like Marriott MAR, Extended Stay STAY and Hyatt H. As it is, Hilton is seen to have a lower mix of luxury and upper upscale rooms, when compared with other hotel giants. The company is evidently developing its luxury portfolio by the expansion of Embassy Suites and Homewood Suites to capitalize on the emerging demand.

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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