Why Hilton expanded its presence in the international market

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Oct. 3 2014, Updated 4:19 p.m. ET

Majority of existing rooms in U.S.

Hilton’s hotels, resorts, and timeshare properties are spread across 91 countries and territories. The majority of the rooms—77%—are located in the U.S.

We’ll discuss Hilton’s brands and business segments in Parts 4, 5, and 6 in this series. On December 31, 2013, Hilton’s portfolio consisted of 678,630 rooms. Almost 82% of the rooms were located in the American region. Most of Hilton’s peers—including Hyatt (H), Marriott (MAR), and Wyndham (WYN)—have concentrated operations in the American region. Approximately, 80% or more of their total hotel properties are located in in the American region. However, Starwood (HOT) has a comparatively lower percentage, ~60%, of properties in the America region.

Part3_Geog spread

Growth in international markets

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Although revenue from the international market forms a small part of Hilton’s total revenue, the company has been expanding operations significantly in a few important locations.  Hilton’s international rooms have grown 47% since 2007. They grew to 148,900 rooms in 2013. In 2007, the company only had 101,000 rooms.

  • In the past seven years Hilton has expanded significantly in China—one of the key emerging markets. In July 2007, it only had six hotels in China—one under the Conrad brand and five under the Hilton brand. This increased to 46 as of June 30, 2014. There are an additional 150 hotels under pipeline.
  • In Europe, the company only had three non-Hilton and non-Conrad branded hotels in 2007. This increased to 116 existing hotels and 123 hotels under pipeline in 2014.
  • Although the majority of Hilton’s existing rooms are located in the U.S., its significant growth plans in other regions are evident by the number of rooms under pipeline in each region. As of June 30, 2014, the company reports that 56% of the 210,000 rooms under pipeline and 71% of the 106,000 rooms under construction were outside the U.S.

Investors should track how Hilton’s growth plan materializes and impacts the company’s stock prices. Emerging economies like China and India have the largest pipeline in the world by guest room count. Hotel companies like Hilton are looking to capitalize on demand growth in these emerging markets.

Investors who want hold a diversified portfolio of companies under the consumer discretionary sector can also invest in the Consumer Discretionary Select Sector SPDR Fund (XLY). There are a number of international-based exchange-traded funds (or ETFs) for investors who want to participate in the growth in emerging markets. The iShares Emerging Markets ETF (or EEMV) invests in large and mid-sized companies in emerging markets including China, Korea, Indonesia, India, and Brazil.

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