Please ensure Javascript is enabled for purposes of website accessibility

Biz and Bling Help Hilton

By Seth Jayson – Updated Nov 16, 2016 at 1:15PM

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

Solid results bring a premium price.

With Paris and her Simple Life continuing well past their allotted 15 minutes, and soaking up all that Internet bandwidth, from time to time, we need to return to Hilton Hotels (NYSE:HLT) to take a look at the commerce that spawned America's favorite, ditzy debutante.

Today, Hilton reported record first-quarter earnings of $0.16 per share, a 60% increase over the dime for last year, fueled by top-line growth from business travel and pricing power both there and in its leisure markets. The all-important revenue per available room (RevPAR) at comparable hotels increased 9.1% for the quarter, while overall revenue at owned hotels came in at a slimmer 3%. The biggest grower was -- once again -- the timeshare segment, which grew 23%

Reading through the Hilton earnings release, it's tough not to get a sense of deja vu. That's because the results from Marriott (NYSE:MAR) look so similar. And therein lies the problem with investing in the established hotel chains: You're more or less at the mercy of fickle travelers and the economy. When times are bad, everyone falls. And when times are good, the stocks make the uphill climb again.

That's also when the big players start adding capacity. Hilton plans to add about 140 hotels to the chain in 2005, amounting to some 18,000 rooms on top of the existing 363,000. With the pricing leverage possible at the luxury end, the firm has announced plans to enter Conrad Hotels in exotic destinations such as Tokyo, Dubai, and Indianapolis. (No, I'm not making that one up.)

Although the entire travel scene seems to be back, it's tough to be as enthusiastic about Hilton shares. Like peers Marriott and Starwood (NYSE:HOT), Hilton already trades above its usual historical ratios of price-to-earnings and price-to-sales. Unfortunately, when a stock is already priced at a premium -- especially these days -- anything less than continued perfection will give shareholders a bad night's sleep.

For related Foolishness:

At the time of publication, Seth Jayson had no positions in any firm mentioned. View his stock holdings and Fool profile here. Fool rules are here.

None

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

Marriott International, Inc. Stock Quote
Marriott International, Inc.
MAR
$137.48 (-1.88%) $-2.63

*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
329%
 
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 09/24/2022.

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.