Hilton Worldwide Holdings Inc. HLT is poised to benefit from solid improvement in revenue per available room (RevPAR), strong leisure travel demand and unit expansion efforts. Also, its focus on strategic partnerships bodes well. However, a macro slowdown in China is a concern.

Let’s delve deeper.

Growth Catalysts

The company is gaining from strong demand for leisure travel, along with growth in business transient and group travel. In the fourth quarter of 2024, Hilton's system-wide RevPAR increased 3.5% year over year. This upside was backed by higher occupancy in leisure and a steady recovery in Group and Business Transient. Its Business Transient RevPAR rose more than 3%, supported by demand from large corporates, with big tech and big banks performing well. Leisure Transient RevPAR grew 4%, driven by higher occupancy and rates, with strong momentum throughout December. Booking windows continued to expand and strong demand in conventions and company meetings drove higher rates for the future.

Owing to strong trends in leisure occupancy and steady growth in business transient and group segments, Hilton expects favorable trends to continue in 2025. For 2025, the company expects RevPAR growth to be between 2% and 3%. Hilton anticipates growth across all major segments, with group performance driven by demand for company meetings and conventions. The company also expects a continued recovery in business transients, supported by large corporates and stable demand from small and medium-sized businesses.

Hilton’s global expansion strategy remains a key catalyst for future growth. In the fourth quarter of 2024, the company opened 171 hotels, representing nearly 23,000 rooms, and signed a record 154,000 rooms for future development — reflecting an 18% increase year over year. Notable recent openings include Hilton’s first Hampton hotel in Africa, Tru in Colombia and Curio in Romania, alongside expansion milestones in the Asia Pacific.
 
With nearly 500,000 rooms in its development pipeline and 25% of those already under construction, Hilton leads the industry in new supply. The company expects net unit growth of 6% to 7% in 2025, supported by strategic brand expansion and increasing demand for lifestyle and luxury hotels.

Hilton continues to drive expansion in key markets, leveraging strategic partnerships and brand growth initiatives. The recently announced licensing agreement with Olive by Embassy is expected to accelerate the expansion of Spark in India, tapping into the country’s growing middle-class demand for premium hospitality.

Concerns

Hilton — which shares space with Marriott International, Inc. MAR, Choice Hotels International, Inc. CHH and Hyatt Hotels Corporation H in the Zacks Hotels and Motels industry — is exposed to uncertainties in financial markets on account of liquidity constraints. Financing conditions in certain regions have been challenging due to a rise in interest rates. The company is cautious in this regard as further challenges could hinder its ability to access cash and make new financing arrangements.

China's dismal performance remains a headwind. In the fourth quarter of 2024, RevPAR in China declined 4% year over year. The drop in RevPAR was due to difficult year-over-year domestic travel comparisons and weaker macroeconomic conditions. Although travel restrictions are easing in the region, demand trends are still lagging.

A Brief Review of the Other Stocks

Marriott is benefiting from steady global travel demand and strategic portfolio expansion. In the fourth quarter of 2024, global RevPAR increased 5% year over year, driven by a 3.2% rise in ADR and a 1.2% increase in occupancy. Also, increased business transient demand and leisure transient RevPAR added to the upside. The company stated global group revenues (at the end of 2024) were tracking 6% higher for 2025 and 10% higher for 2026, driven by increases in both room nights and ADR.

Choice Hotels is benefiting from unit expansion, franchising efforts and the integration of the Radisson Americas brands. Also, the focus on strategic partnerships and rewards programs bodes well. Ongoing investments in franchisee-facing systems and tools, brand portfolio and platform capabilities are increasingly shaping earnings results while providing additional mechanisms for driving growth. The company expects growth to be driven by organic expansion in higher-revenue hotels and markets, robust increases in effective royalty rates, continued gains from ancillary revenue streams, strong international performance and additional revenue-generating opportunities resulting from its expanded scale.

Hyatt has been witnessing strong trends for business transient demand throughout 2024, with large corporate customers normalizing the growth, along with increasing leisure transient demand. During 2024, system-wide comparable RevPAR increased 4.6% year over year, with the metric growing 5% in the fourth quarter, attributable to increased business and leisure transient travel along with improved group travel. It expects 2025 system-wide RevPAR to increase in the range of 2-4% year over year. It anticipates business and leisure transient revenue growth to continue throughout the year. It expects RevPAR in the United States to grow near the midpoint of the system-wide outlook range, driven by strong group and business transient demand, but expects to see a continuation of elevated levels of outbound international travel.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

Marriott International, Inc. (MAR) : Free Stock Analysis Report

Hyatt Hotels Corporation (H) : Free Stock Analysis Report

Choice Hotels International, Inc. (CHH) : Free Stock Analysis Report

Hilton Worldwide Holdings Inc. (HLT) : Free Stock Analysis Report

This article originally published on Zacks Investment Research (zacks.com).

Zacks Investment Research