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How Hilton’s Valuation Compares to Peers

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Current valuation

Hilton (HLT) currently trades at a forward EV-to-EBITDA multiple of 17.6x. Hilton’s valuation is significantly higher than its average valuation of 13x since December 2013.

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Peer comparison

  • Marriott (MAR) is trading at 14.5x.
  • Hyatt (H) is trading at 10.2x.
  • Wyndham (WYN) is trading at 8.7x.
  • Intercontinental Hotel Group (IHG) is trading at 13.2x.

The market is expecting Hilton’s EBITDA per share to fall 36.1%. Analysts expect Marriott’s EBITDA per share to rise 40% in 2017, mainly due to Marriott’s Starwood acquisition, which was completed in December 2016. Analysts expect Hyatt’s EBITDA to rise 4% in 2017 and InterContinental’s EBITDA to rise 7% in 2017. Wyndham’s EBITDA is expected to rise 4% in 2017.

Our analysis

The hotel industry is currently dealing with many headwinds like slowing GDP growth. Slow GDP growth means less corporate travel, which is bad news for hotels, especially big ones. Increased geopolitical and terrorist concerns, the strengthening of the US dollar, and increasing competition are other headwinds plaguing the industry.

However, the global increase in travel demand along with Hilton’s strong room pipeline will help secure future growth for the company. These factors will be major valuation drivers in the long term.

Investors who want to hold a diversified portfolio of companies in the consumer discretionary sector can also invest in the Consumer Discretionary Select Sector SPDR Fund (XLY).

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