1. Hilton Worldwide Holdings Inc. (NYSE: HLT)
Number of Hedge Fund Holders: 60
Topping the list of the 10 best hotel stocks to buy now is Hilton Worldwide Holdings Inc. (NYSE: HLT). Based in Virginia, one of the world’s largest hotel firms manages, franchises, owns, and leases hotels and resorts, as well as licenses its trademarks and intellectual property. Hilton opened 414 new hotels totaling 55,600 rooms in 2020, representing a net unit increase of 47,400 rooms.
The company has a market cap of $35 billion and full-year revenue of $4.3 billion in 2020, down from $9.4 billion in 2019. The stock has gained 80% over the past twelve months.
Bill Ackman’s Pershing Square held the most shares of HLT with 13 million shares worth $1.48 billion at the end of the fourth quarter. The total value of the shares held by 60 hedge funds in Q4 2020 was $6.02 billion.
New York-based Pershing Square Holdings Ltd mentioned that HLT remained resilient through the pandemic in its Q4 2020 investor letter:
“Hilton is a high-quality, asset light, high-margin business with significant long-term growth potential, led by a superb management team. The hotel industry was one of the most negatively impacted as a result of the COVID-19 pandemic. As the pandemic set in, Hilton’s management team deftly navigated a challenging situation and took decisive actions to right size Hilton’s cost structure for the current economic environment, and fortify its balance sheet. As a result, Hilton managed through the pandemic and positioned the company to generate enhanced margins, improved cash flows and returns, once the business recovers to pre-COVID-19 demand levels.
Hilton’s systemwide occupancy bottomed at 13% in April 2020, but rebounded to approximately 40% during Q3 and Q4 as COVID-19 became better understood and travel restrictions lifted. Positive demand momentum experienced in the summer and early fall were disrupted in November and December due to rising COVID-19 cases and tightening travel restrictions.
Hilton management expects a more pronounced and sustained recovery to commence in the second half of 2021, particularly as the COVID-19 vaccine is rolled out more broadly, driven by increased leisure demand and a rebound in business travel. Management’s conviction is driven by a number of factors which include: (1) pent-up leisure travel demand, (2) large amounts of unspent consumer savings, (3) large corporations indicating a desire to resume business travel, (4) improving business transient booking trends, (5) proprietary survey work in which 80% of respondents express a desire to travel, and a substantially better second half of 2021 group booking calendar.
Despite significant headwinds, Hilton continued to execute on its long-term strategy, and opened 47,400 net new rooms in 2020 (+5%). Hilton’s pipeline expanded 3% year-over-year to 397,000 rooms, or 39% of the existing room footprint, 51% of which are currently under construction. We believe Hilton will continue to grow its market share over time given independent hotels’ increased interest in seeking an affiliation with global brands, particularly in the wake of the pandemic.
Hilton is well positioned to thrive as the recovery sets in due to its best-in-class management team, portfolio of great brands, dominant market position, capital-light economic model, deep development pipeline and strong balance sheet. Hilton is in the early stages of a multi-year recovery, which we believe will deliver long-term earnings that are meaningfully greater than pre-2020 levels.”
Image by Автандил Цецхладзе from Pixabay
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