Please ensure Javascript is enabled for purposes of website accessibility

Why Shares of Hilton Worldwide Holdings, Inc. Dropped 18% in 2015

By Jeremy Bowman – Jan 15, 2016 at 10:17AM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The hotel giant struggled last year along with the rest of its peers.

What: Shares of Hilton Worldwide Holdings (HLT 3.45%) took a dive last year, falling 18%, according to data from S&P Capital IQ. The decline came amdist a broader sell-off in the hotel industry as concerns about slowing growth and the threat of Airbnb and other such services looms. As you can see from the chart below, Hilton's decline tracked with many of its peers.

HLT Chart

HLT data by YCharts.

So what: Reports of room overcapacity and falling room rates dotted the industry landscape last year. In New York, the biggest hotel market in the country, room capacity has grown 21% in the last five years, with falling room rates as a consequence. The city already has 100,000 hotel rooms and 27,000 more are under construction. 

In major international markets like the U.K. and Dubai, rates were also down. 

Hilton started off the year on a high note as it moved higher after its fourth-quarter earnings report -- earnings per share for 2014 improved 30% over the previous year. The stock dipped in May when private equity giant Blackstone Group announced it would sell 90 million shares in the hotel chain, a stake worth close to $3 billion at the time, reducing its stake in the company from 55% to 46%.  

Despite a strong second-quarter earnings report in July, the stock continued to sell off in the subsequent weeks, and a downgrade in August pushed the stock below $26 for the first time since the beginning of the year. On Sept. 18, the stock lost 6% as peer La Quinta lowered its revenue-per-room growth forecast. The stock continued to slide throughout the duration of the year, though it was briefly propped up by a plan to spin off some of its properties into a REIT.

Now what: Hilton shares have continued to slide in 2016, down 15% already. Despite a dive of more than 40% since its peak last year, the stock still isn't cheap at a P/E of 24, and the hotel industry continues to face many of the same challenges it confronted last year. Rising minimum wages also adds a new hurdle as those companies depend on low-wage workers. With the market in turmoil, Hilton shares could have further to fall.

Jeremy Bowman has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Hilton Worldwide Holdings Inc. Stock Quote
Hilton Worldwide Holdings Inc.
HLT
$125.97 (3.45%) $4.20

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
331%
 
S&P 500 Returns
106%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 10/05/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.