Why the Blackstone acquisition was important for Hilton

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Blackstone acquired Hilton in 2007

Hilton Hotels Corporation was acquired by Blackstone in an all-cash transaction valued at $26 billion. The acquisition was an important milestone in Hilton’s (HLT) history. The new management, led by the President and CEO Christopher J. Nassetta, successfully achieved rapid growth. It transformed the hotel’s business structure.

 Part14_Growth after Aquisition1

Growth after 2007

After Blackstone acquired the company in 2007, it displayed above industry average growth in capacity—or room supply. Its growth included:

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  • It achieved an industry leading position in terms of room supply. Room supply increased by 40% to 694,000 rooms in 2Q14—compared to 496,000 rooms in 2Q07.
  • This is the highest growth recorded in the industry during the same period among the major players including Marriott’s (MAR) 34%, Starwood’s (HOT) 25%, InterContinental Hotel Group’s (or IHG) 23%, Wyndham’s (WYN) 20%, and Choice Hotels’ (or CHH) 14%.
  • It increased its presence in the Luxury and Focused Service segment. It added the Home2 Suites brand in 2009. It recently added another brand—called Curio—in the Focused Service segment.
  • It improved margins by increasing effective franchise fees. It also increased the percentage of capital light share in the Timeshare segment. This increased the revenue per available room (or RevPAR). We’ll discuss this more in the next part of the series.

Investors can capitalize high growth hotel stocks by investing directly in the companies’ shares or through exchange-traded funds (or ETFs). Examples of ETFs are the PowerShares Dynamic Leisure and Entertainment Portfolio (or PEJ), the First Trust U.S. IPO Index Fund (or FPX), and the Consumer Discretionary Select Sector SPDR Fund (XLY). The ETFs invest a portion of their funds in hotel and lodging shares.

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