We recently published a list of 10 Best Hotel Stocks To Buy Now. In this article, we are going to take a look at where Hilton Worldwide Holdings Inc. (NYSE:HLT) stands against other best hotel stocks.

According to Cognitive Market Research, the size of the global hotel market was $784.82 billion in 2023 and is projected to grow to $1,126.04 billion by 2030. From 2023 to 2030, the hotel industry’s compound annual growth rate is anticipated to be 5.29%. Regionally, North America holds a substantial 30.66% market share, mostly because of the region’s abundance of hotels and resorts.

Recently, in Q2 2024, demand for hotels rose 1.3% year over year, above a 0.6% increase in supply and leading to a 0.7% increase in occupancy in the US. Secondly, a 2.2% year-over-year rise in Q2 2024 revenue per available room (RevPAR) was driven by higher occupancy combined with a 1.5% increase in average daily rate (ADR) YoY. The benefits were mostly due to two factors: the early Easter this year, which came in late Q1 2024 and contributed to higher business travel in the second quarter of this year compared to the previous year, and the complete solar eclipse, which encouraged more leisure travel throughout a significant portion of the US. Although the demand for hotels increased in the second quarter of 2024, short-term rentals and cruise lines maintained their market share gains. Additionally, the average hotel hourly wage was still more than $10 less than the average hourly wage in the country.

As per Frederic Dominioni, the Chief Revenue Officer of Solonis and a leading provider of modern property management solutions, there are five important trends driving the recovery in the hotel industry post-pandemic. Firstly, guests’ expectations are rising because of rising room rates, which increased by 54% from January 2022 to 2023. Secondly, the rise in “workcation” travels brought about by hybrid work has raised the need for flexible locations and services. Third, there is still a high desire for self-service choices and mobile technology, which helps to ease the staff shortage. Fourth, with 88% of travelers looking for local adventures, travel experiences have taken center stage. Lastly, given that 65% of travelers give priority to eco-friendly lodging, sustainability is essential. Hotels will prosper if they adjust to these developments through improving amenities and customizing visitor experiences.

Looking ahead, CBRE’s 2024 Global Hotels Outlook reveals that 2024 will be another year of progress for the US economy after 2023 saw RevPAR reach a record high. The continuous improvement in inbound foreign travel, the meetings and group events segment’s solid performance, and rising interest from leisure visitors are all expected to contribute to RevPAR growth, which is predicted to reach almost 3% year over year. Urban areas that are more appealing to leisure travelers and have more expensive hotels should do well, but competition from other sources, such as cruise lines, short-term rentals, and camping, is projected to restrict demand as well as pricing for traditional hotels. Hotel salary growth slowed to 4.6% in Q2 2024 from 5.5% in Q1, but it was still higher than the 4.0% hourly wage rise for all employees due to a decrease in job opportunities in the hotel industry. In Q2 2024, occupancy rates for all types of locations stayed below 2019 levels. Interstate and town sites were the most similar to their 2019 levels, at 99%, while urban and resort destinations were 94% and 96%, respectively.

On the other hand, Warren Marr, US Hospitality & Leisure Industry Advisor stated:

“Continued economic uncertainty, an upcoming election, and continued geopolitical tensions are expected to impact hotel performance in the US through 2025. Since our last issue of Hospitality Directions US in November, we’ve seen two additional quarters of decline in hotel occupancies, for a total of four, but expect to see a gradual rebound the balance of this year and into next, off of easier comps. That said, we expect average daily rate growth to trail PCE inflation through the rest of this year and 2025.”

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Hilton Worldwide Holdings Inc. (NYSE:HLT)

Number of Hedge Fund Holders: 64

Hilton Worldwide Holdings Inc. (NYSE:HLT) is one of the biggest hotel chains in the world, with more than 6,500 locations worldwide.  It has 22 brands and 1.2 million rooms. It has a number of midscale and premium properties. The two biggest brands, Hampton and Hilton, account for 28% and 19% of the total rooms offered by the company. It also has a loyalty program with over 115 million members called Hilton Honors.

The company’s brand strength is demonstrated by the company’s mid-single-digit share of global hotel rooms and a 20% share of all industry pipeline rooms under construction.

Additionally, the firm has the ability to increase its market share further since its present portfolio amounts to 5% of all industry rooms, while its pipeline accounts for 21% of all rooms under construction globally.

Hilton’s strong upper scale, lifestyle, and luxury presence are boosting its brand intangible asset, the main source of its wide moat, even though the travel industry is facing some short-term downturn in demand. With a partnership with Small Luxury Hotels in February 2024 and the acquisition of a majority stake in the Nomad brand in April 2024, the firm’s portfolio is growing by several hundred hotels. Its pricing prowess is supported by its newly launched midscale brand, Spark by Hilton, which debuted in 2023; its extended-stay product, LivSmart Studios, which debuted in 2023; and its acquisition of Graduate Hotels in 2024. 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 1st on our list of Best Hotel 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 article is originally published at Insider Monkey.