Shares of Hilton Worldwide Holdings Inc. (HLT -1.64%) jumped 12.7% in May, according to data provided by S&P Global Market Intelligence, after the hotel chain reported strong earnings momentum early in 2017.
Revenue was up 4.1% on a pro forma basis to $766 million and net income was $74 million, or $0.22 per share. But the key number for investors is that revenue per available room was up 3% and $173 million has been returned to shareholders already this year.
The higher room rates is also leading to a lot of development activity. There was net unit growth of 7,800 room, approval for another 27,000 rooms, and the pipeline stands at 325,000 rooms right now.
The hotel business is booming overall and Hilton is one of the biggest beneficiaries right now. And with the global economy slowly improving and vacation and business travel increasing, the momentum doesn't seem like it's going to slow down. Another factor working in Hilton's favor is scale. Consolidation in the hotel business has left a small number of large operators with most of the power in building supply and setting prices. The stock isn't cheap at 37 times this year's earnings estimates, but with so many factors working for the company, it's still a good stock for investors to own.