Hilton share price jumps 9.6 percent in first trading day
iNVEZZ.com, Friday, December 13: Shares in Hilton Worldwide (NYSE:HLT) jumped as much as 9.6 percent in their first day of trading on the New York Stock Exchange yesterday. The world’s biggest hotel operator on Wednesday raised $2.3 billion (£1.4 billion) in the world’s largest hotel IPO on record so far. The company and one of its shareholders, Hilton Global Holdings LLC, sold 117.6 million shares at $20 each, within the guide range of between $18 and $21, ranking the Hilton IPO as the second biggest offering globally for this year (Hilton IPO raises $2.34 billion at $20 a share).
In the first trading day, Hilton’s share price rose to a peak of $21.92 before easing slightly to close at $21.50, still 7.5 percent higher than the initial offering price, suggesting solid investor interest. The hotel sector “is a very attractive sector to be in as the fundamentals are very strong in the U.S. and you have a real expansion story in the emerging markets,” Ryan Meliker, senior analyst at investment bank MLV & Co. told Reuters. Hilton, which is majority-owned by private equity firm Blackstone Group LP (NYSE:BX), runs 4,080 hotels, resorts and timeshare properties comprising 671,926 rooms in 90 countries and territories worldwide.
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The US hotel industry was severely hit by the global financial crisis, but has started to recover. Last year, the lodging industry generated $39 billion in pre-tax income, up 14.3 percent year-on-year, and revenue of $155.5 billion, up 5.5 percent y/y, according to data by the American Hotel & Lodging Association. This year, growth in the sector has continued with fewer vacancies and higher room rates, particularly among hotels in higher priced segments, helping hotel stocks outperform other real estate sectors. The Dow Jones U.S. Hotels Index, which includes 92 hotel stocks, has risen about 27 percent so far this year. The Baird/STR Hotel Index, which tracks the 15 biggest US-listed hotel companies by market capitalisation, has gained some 25 percent this year.
Growth in the US hotel sector is expected to continue, with PricewaterhouseCoopers predicting revenue per available room (RevPAR) to rise 5.5 percent this year and 5.9 percent next year. The consultancy also expects room rates and occupancy levels to keep growing. Those forecasts are supporting investors’ appetite for hotel stocks. “Investors and management teams see at least two to three more years of strong growth in this up cycle, which is helping support stocks’ valuations and keeping them in favour with both real estate and non-real estate investors,” David Loeb, senior hotel research analyst and managing director at Baird, told Forbes. Interest in Hilton is additionally supported by the company’s potential for growth in emerging markets like Asia and South America and hotel-management expertise.
Hilton’s major listed competitors have enjoyed a strong share price rally this year, with Starwood Hotels & Resorts Worldwide (NYSE:HOT) climbing 28 percent, Marriott International (NASDAQ:MAR) rising 24 percent, and Wyndham Worldwide (NYSE:WYN) growing 33 percent.
**As of yesterday’s NYSE close buy Hilton shares at $21.57.**
**As of yesterday’s NYSE close sell Hilton shares at $21.53.**
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