Hotel Chain Hilton Upgraded By Barclays, Says It Will Cope Better With Macro Challenges

Barclays believes Hilton Worldwide offers investors a better opportunity than Hyatt Hotels.

‍

Hilton shares were upgraded by analyst Brandt Montour from equal weight to overweight from equal weight, indicating that the hotel chain will be able to weather macroeconomic challenges more successfully than its peers. Consequently, he downgraded Hyatt to equal weight from overweight, saying the company is more exposed to China and therefore has little upside potential from here on out.

‍

"Following a strong performance in share price performance for H over the past 12 months, we think the share valuation now limits upside potential and we are moving to the sidelines. "We are shifting our preference towards HLT due to its underappreciated net unit growth prospects against the backdrop of a slowing macroeconomic environment", Montour wrote in a note he sent out on Thursday.

‍

Among its competitors, Hilton has the strongest net unit growth among its lodging companies, according to the analyst, making it a leader in its class. Due to the slowdown in global revenue per available room, Montour expects this to be a bigger deal for investors.

‍

“HLT valuation is not overly attractive based solely on the fact that net unit growth will reaccelerate faster than peers, so the company should be able to sustainably outperform peer averages for some time to come, and against a backdrop like this, relative valuation is less demanding,” Montour writes.

‍

“We believe that as we move through 2023, and global RevPAR begins to decelerate as a result of tough comparisons and the Fed-induced slowdown in consumer demand, structurally higher net unit growth will demand a more attractive relative valuation multiple than what it is today,” Montour concluded.

‍

It is anticipated that both hotel chains will experience significant growth in 2023. Shares of Hilton are up by 16% so far this year, while those of Hyatt are up by even more, advancing 32% to date.

‍

Hilton shares are expected to be priced at $168 by the analyst, which is a 10% increase from the current closing price, which was $151 previously. As of Thursday morning, Hilton shares are up 0.5% in premarket trading. There is a drop of about 1.5% in Hyatt's shares.