3. Hilton Worldwide Holdings Inc. (NYSE:HLT)
Number of Hedge Fund Holders: 64
Among the largest hotel chains globally, Hilton Worldwide Holdings Inc. (NYSE:HLT) operates more than 6,500 properties. It features 1.2 million rooms and 22 brands. It has several luxury and midscale properties. Of the total number of rooms the company offers, 28% and 19% are attributed to its two largest brands, Hilton and Hampton. Hilton Honors is a loyalty program that boasts over 115 million members.
The company’s mid-single-digit percentage of hotel rooms worldwide and its 20% share of all industry pipeline rooms under construction serve as indicators of the strength of its brand.
Furthermore, the firm has the capacity to grow its market share because its current pipeline represents 21% of all rooms under development worldwide, while its portfolio currently comprises 5% of all industry rooms.
Even if the travel industry is experiencing a brief decline in demand, Hilton’s strong upper scale, lifestyle, and luxury presence are enhancing its brand’s intangible value, which is the primary source of its wide moat. The company’s portfolio is expanding by several hundred hotels thanks to a collaboration with Small Luxury Hotels in February 2024 and the acquisition of a controlling stake in the Nomad brand in April 2024. Its extended-stay offering, LivSmart Studios, which made its debut in 2023, its newly formed midscale brand, Spark by Hilton, which debuted in 2023, and its acquisition of Graduate Hotels in 2024 all serve to bolster its pricing power. The extended-stay idea LivSmart and the luxury economy/midscale brand Spark of Hilton actually have several hundred partners in talks to become part of the company’s portfolio. Spark has the potential to reach a few thousand units over time, making it an appealing unit growth catalyst for the company.
Pershing Square Holdings stated the following regarding Hilton Worldwide Holdings Inc. (NYSE:HLT) in its Q2 2024 investor letter:
“In the first half of 2024, Hilton Worldwide Holdings Inc. (NYSE:HLT) generated strong revenue growth as the lodging industry experienced solid global demand against a favorable supply backdrop. Near-term industry trends remain positive, with continued strong international growth, improving business transient demand and extremely robust group demand, which is poised to sequentially accelerate in the third quarter. Leisure travel continued to moderate from the high levels of recent years following the COVID-19 reopening.
In the second quarter, HLT’s revenue per room (“RevPAR”), the industry metric for same-store sales, increased 3.5% as compared to 2023. Combined with strong 6% net unit growth, aggregate fee revenues grew 10%. Earnings per share grew 17% year-over-year, benefiting from Hilton’s excellent cost control and continued best-in-class capital return. Reflecting an incrementally challenging macroeconomic picture, principally in China, the company slightly reduced the upper end of their prior RevPAR guidance, now estimated by management to be +2% to +3%, while modestly increasing full year’s earnings guidance…” (Click here to read the full text)
Bill Ackman’s Pershing Square is the largest shareholder in the company, with 8,952,290 shares worth $1.95 billion.
