We recently compiled a list of the 10 Best Leisure Stocks To Buy Now. In this article, we will look at where Hilton Worldwide Holdings Inc. (NYSE:HLT) stands against the best leisure stocks to buy now.

In recent years, the leisure market has experienced remarkable growth. According to Market Research Intellect, the size of the global leisure market was estimated at $1.46 trillion in 2023 and is projected to expand at a compound annual growth rate of 21.8% from 2024 to 2031, when it will have grown to $8.6 trillion.

Along with growth, according to the YouGov survey, there were also notable changes in the leisure and entertainment industry in 2023 due to changing customer demands and technological breakthroughs. Even though 81% of US and 79% of UK customers recognize the value of museums, more than half of them only occasionally visit them. On the other hand, only 5% of people in the APAC and UAE skip theme parks, compared to 30% in North America.

While out-of-home entertainment expenses are on the rise, 13% of customers intend to spend more. Additionally, 36% of viewers find advertisements entertaining, and 36% of them are using virtual reality. In the United States, 10% prefer to buy movie tickets in advance, while 27% are concerned about how AI breakthroughs may affect professions, notably in information technology and accounting.

In the meantime, gambling is changing; 70% of US gamblers are open to sports betting with AI assistance, and cryptocurrency betting is becoming more popular in the US and the UK. As we have mentioned in our article, “10 Best Sports Betting Stocks to Buy Now,” generative AI is projected to dramatically impact sports betting in the next 12-18 months.

As per YouGov study, with 10% of UK consumers possessing smart devices and 24% looking at second-hand equipment, the fitness industry has also experienced growth. In general, live events such as food and drink festivals remain popular; even with safety concerns, 45% of attendees want to participate in 2024. Lastly, a shift in consumer views is evident in the rise of dynamic pricing, particularly in the US, where 54% of consumers are willing to pay more to support artists.

On the other hand, the size of the global leisure travel market was valued at $340.31 billion in 2022 and is projected to grow at a CAGR of 22.6% from USD 417.3 billion in 2023 to $2129.96 billion by 2031, as per SkyQuest.

Regionally, North America has been the market leader for leisure travel, especially the United States and Canada. However, when it comes to the global leisure travel industry, Asia-Pacific is expanding at the fastest rate. Countries in Southeast Asia, such as China and India, are major destinations for tourists in the area.

Amid the growth, a most recent Longwoods International tracking study of American travelers indicates that 39% of them plan to go abroad for leisure over the next 12 months. Furthermore, 34% of those who plan to travel abroad for leisure say they will travel abroad more this year,  50% plan to take about the same number of such trips, and only 16% say they would travel abroad less.

Amir Eylon, President and CEO of Longwoods International, stated that the expected boost in international travel by Americans is impressive, given lingering concerns about inflation and the financial health of the U.S. consumer. Moreover, he revealed that it is further evidence that American travelers see COVID-19 fading away in their rear-view mirror.

Methodology:

We sifted through holdings of leisure ETFs and online rankings to form an initial list of 20 leisure stocks. Then we selected the 10 stocks that were the most popular among institutional investors. The stocks are ranked in ascending order of the number of hedge funds that have stakes in them, as of Q2 2024. We have used the stock’s Revenue Growth Rate (year-over-year) as a tie-breaker in case two or more stocks have the same number of hedge funds invested.

Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points. (see more details here)

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.

Overall HLT ranks 3rd on our list of the best leisure stocks to buy now. While we acknowledge the potential of HLT as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than HLT but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.

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Disclosure: None. This post was originally published on Insider Monkey.