Summary
- Hilton has a new and improved business model since its restructuring under Blackstone and after the spinoffs of its timeshare business and real estate holdings.
- The Hilton business flywheel is a self-reinforcing loop that leads to loyal customers and satisfied owner partners.
- Shares should compound over 13% annually over the next decade and beyond.
Although Hilton (HLT) has been around for 100 years, the new and improved version of Hilton available to public market shareholders has a new and improved business model that should provide shareholders above-average returns over the next decade.
Hilton was taken private by Blackstone in 2007 in a leveraged buyout before the financial crisis and then brought back to the public markets via an IPO in 2013. Under Blackstone’s stewardship, much of the real estate owned by Hilton was sold off and the number of hotel rooms in Hilton's franchise system doubled to 900,000. Since the IPO, Hilton has spun off a bulk of its real estate holdings and its timeshare business into two separate publicly traded companies. After the restructuring of Hilton's portfolio by Blackstone and the two spin-offs, the current Hilton is an asset-light hotel brand management company that has excellent economics.
The "flywheel" for Hilton's business and economic returns is summarized nicely by the following slide from the company's recent investor presentation. 1) Leading hotel brands serving virtually any lodging needed anywhere lead to 2) Satisfied Loyal Customers, which lead to 3) Premium, Growing Market Share, which leads to 4) Satisfied Owners, which leads to 5) Leading Hotel Supply & Pipeline, which leads to 6) Hilton's Financial Performance.
