Despite challenges, Hilton hails “golden age of travel”
With a rapidly growing middle class around the world, the state of travel is getting stronger
With the Chinese economy stabilising and the United States’ economic growth outlook improving, hotels are poised to cash in on recent investments.
Despite challenges like Airbnb and other market forces, major hotel chains are pushing ahead with new upscale brands aimed at millennials.
In addition, these same companies have made long-term commitments which will see them soon opening thousands of new rooms worldwide.
With the Chinese economy stabilizing following a 2018 slow-down and the United States experiencing a brighter growth outlook after a sluggish first quarter, these same hotels are poised to cash in on their earlier investments.
The golden age of travel
These positive developments have led Hilton Chief Financial Officer Kevin Jacobs to welcome what he calls the golden age of travel.
“The state of travel is quite strong,” Jacobs said on Yahoo Finance The First Trade. “The way we think about it, there is a rapidly growing middle class around the world.”
Hilton plans to spend 2019, which marks its 100th year in business, opening new locations across the globe.
The company’s development pipeline tallies a robust 2,400 hotels consisting of more than 364,000 rooms in 103 countries. About 195,000 of the rooms in the development pipeline are outside of the United States, including a sizable chunk in China.
Jacobs said one out of every four hotel rooms currently in development in China belongs to Hilton.
The company also recently introduced the upscale brand LXR Hotels & Resorts. The first location opened in Dubai late last year, with another debuting in London soon.
Hilton’s system-wide occupancy and revenue per available room (key industry metric known as RevPAR) rose by 0.8% and 3%, respectively in 2018. For 2019, Hilton expects RevPAR to rise by 1% to 3%.
Hilton’s chief rival, Marriott International, is moving full steam ahead too. Marriott told investors in March it plans to add 275,000 to 295,000 rooms by 2021. Its development pipeline already stands at a record 478,000 rooms.
High-performing hotel stocks
Meanwhile, hotel stocks have been solid outperformers this year, even in the face of concerns about global growth and the subsequent impact on travel.
Hilton is up about 22% this year while Marriott has tacked on 24%. A smaller company, Choice Hotels, has gained about 15%.
Meanwhile, STR and Tourism Economics peg RevPAR growth at 2.3% in 2019. Experts have downgraded their growth outlook for the hotel industry twice since last August.
Let’s take a look at a few other projects currently underway by Hilton:
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