Morningstar | Hilton's revPAR Share Gains and Loyalty Member Growth Signs of a Strengthening Brand Advantage
We expect Hilton's room share expansion to be among the industry's fastest over the next decade because of an industry-leading pipeline, favorable next-generation traveler position supported by newer brands, and its highly rated loyalty program. The company currently has mid-single-digit share of global hotel rooms with around 20% share of all industry pipeline rooms under construction. Further, its U.S. (around 70% of total adjusted EBITDA) share of existing rooms is low double digits, with a pipeline share of rooms under construction at roughly 25%. We see room growth averaging midsingle digits over the next decade (above the long-term U.S. supply growth average of 2%), implying market share gains ahead for Hilton.In addition to an intangible brand advantage, Hilton has switching cost barriers through its asset-light model of mostly managed or franchised rooms. These asset-light rooms not only offer high returns on invested capital, but also contract lengths of 20 years that are costly to terminate.We expect Hilton’s intangible brand asset and switching cost advantage to strengthen, driven by new hotel brands and its highly rated loyalty program. Hilton has added several brands in the past few years, including Tru, which launched in January 2016 and already has around 550 hotels open or under commitment as of the end of 2018. Hilton also has a solid loyalty membership base at 90 million as of the end of the first-quarter 2019, and many of its brands continue to be ranked toward the top by J.D. Power in regards to customer satisfaction.Cyclicality and overbuilding in the industry present the main risk for shareholders. Typically, lodging recoveries last seven to nine years. We model this cycle to last through 2019 (10 years), which we believe is reasonable considering that from 2009 through 2017, U.S. demand and supply have increased by around high 20s and 10%, respectively, with supply growth roughly matching demand growth in 2019.Hilton Worldwide Holdings is a holding company. Through its subsidiaries, the company is engaged in hospitality with operations organized in two operating segments: management and franchise, which includes all of the hotels the company manages for third-party owners, as well as all franchised hotels operated or managed by someone other than the company; and Ownership, which includes hotels that the company owned or leased or that are owned or leased by entities in which the company owns a noncontrolling financial interest. Hilton Honors is the company's guest loyalty program that rewards guests with points for each stay at nearly all of its properties, which are then redeemable for free nights and other goods and services.
Morningstar, Inc. is a leading provider of independent investment research in North America, Europe, Australia, and Asia. The company offer an extensive line of products and services for individual investors, financial advisors, asset managers, and retirement plan providers and sponsors.
Morningstar provides data on approximately 530,000 investment offerings, including stocks, mutual funds, and similar vehicles, along with real-time global market data on more than 18 million equities, indexes, futures, options, commodities, and precious metals, in addition to foreign exchange and Treasury markets. Morningstar also offers investment management services through its investment advisory subsidiaries and had approximately $185 billion in assets under advisement and management as of June 30, 2016.
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