Hilton Worldwide Holdings Inc. HLT has announced a strategic alliance with Playa Hotels & Resorts N.V. PLYA with an aim to boost the company’s all-inclusive resort portfolio.

Playa Hotels & Resorts, which owns, operates and develops all-inclusive resorts, will convert two Playa resorts — THE Royal Playa del Carmen and the Dreams La Romana — into Hiltons’ all-inclusive resorts. Following the launch of these two resorts, Hilton will add 1,269 new guest rooms to its portfolio. Both the companies have plans to convert eight other resorts by 2025.

This latest alliance with will not only help to attract more customers but is likely to help Hilton expand its footprint in the Caribbean and Latin America. Currently, the company operates 140 hotels and resorts in the Caribbean and Latin America, which comprises approximately 60 properties in Mexico.

Guests visiting these converted properties will be able to earn and redeem points through Hilton’s largest loyalty program — Hilton Honors. With about 78 million members, this network has created an extremely valuable asset for the company. In 2017, the company added over 11 million members to this program. Also, in the second quarter of 2018, more than 3 million members were added to Hilton Honors.

Expansion Strategy to Drive Growth

In a bid to maintain its position as the fastest-growing global hospitality company, Hilton is continuing to drive unit growth. In the first quarter of 2018, the company registered net unit growth of 7,100 rooms and witnessed a 7% increase from the prior-year quarter. Also, during the second quarter, Hilton opened 123 hotels, taking room count to 17,100. The company achieved net unit growth of 15,800 rooms, indicating an 18% increase from the prior-year quarter. For 2018, the company projects approximately 6.5% net unit growth. It also continues to have more rooms under construction in Europe, the Middle East and the Asia Pacific compared with any other hotel chain. Hilton expects more international expansion in the current year.

Moving ahead, such widespread expansion is expected to drive Hilton’s system-wide comparable revenue per available room (RevPAR) further. In the second quarter, comparable RevPAR increased 4% year over year. The improvement was driven by growth in occupancy and average daily rate (ADR). Strength in the company’s international hotels mainly in Europe and the Asia Pacific also contributed to the upside.

Driven by an expanding global brand presence, shares of Hilton have gained 18.3% in a year, outperforming the industry’s growth of 0.2%.

 

Key Pick

Hilton, which share space with Marriott International, Inc. MAR, has a Zacks Rank #3 (Hold). A better-ranked stocks worth considering in the same space is Red Lion Hotels Corporation RLH carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Shares of Red Lion Hotels have gained 31% in the past six months.

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Playa Hotels & Resorts N.V. (PLYA): Free Stock Analysis Report
 
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