Hilton Worldwide

Hilton's second-quarter revenue per available room, or revPAR, increased 3.9%, ahead of the hotelier's 2%-3% target. Unit and pipeline growth were up 6.1%. Adjusted EBITDA grew 5%. The company increased its 2026 revPAR growth guidance to 3.0%-3.5% from 2%-3%.

Why it matters: Despite elevated gas prices due to the Iran war, the desire to travel to Hilton's brands continues. We see revPAR strengthening to about 5% growth in both 2027 and 2028 amid ongoing economic growth and US infrastructure spending. In our view, the mid-single-digit revPAR growth in Hilton's core midscale and extended-stay brands (Hampton, Tru, Homewood, and Home2) highlights they are beneficiaries of the pick-up in US infrastructure investment, given the presence near interstates. We expect this pace will continue. Buoying our favorable demand outlook is US industry supply growth, which is just 0.5% this year, compared with the 2% long-term average. This imbalance should enhance pricing power, underpinning our expectation for 6.5% unit growth in 2026.

The bottom line: We plan to increase our $260 fair value estimate per share for wide-moat Hilton to about $270 for time value and a lift of our 2026 revPAR growth to 3.2% from 2.5%. At 22 times forward adjusted EV/EBITDA (versus about 16 times prior to the pandemic) investors are overpricing Hilton's stout brand edge. Hilton announced Project Rise, which currently provides half of US owners discounted technology, loyalty, and distribution fees for enhancing traveler experience levels. We see this investment supporting its brand edge and our 2026-35 5% average annual unit growth. At a share price of $320 per share, investors appear to be pricing in 5% average annual revPAR and unit growth during 2026-35. We believe the revPAR expectation is aggressive given the roughly 3% long-term lift historically seen in the US. We model revPAR growth of 3.5%-4.0% during this time.

After reviewing Hilton's second-quarter results, we have increased our fair value estimate to $270 per share from $260 for stronger revenue per available room, or revPAR, growth in 2026 and the time value of money. Our valuation implies a 2027 adjusted enterprise value/EBITDA of 18 times. The key drivers of our financial model are revenue per available room, unit growth, and ownership segment expenses.

Hilton's second-quarter revenue per available room, or revPAR, increased 3.9%, ahead of the hotelier's 2%-3% target. Unit and pipeline growth were up 6.1%. Adjusted EBITDA grew 5%. The company increased its 2026 revPAR growth guidance to 3%-3.5% from 2%-3%. Despite near-term headwinds from the Iran war (Middle East 3% of sales), Hilton's brands are seeing improving demand in the US (75%) due to secular tailwinds of higher tax refunds and AI, onshoring manufacturing, and infrastructure investment. This supports our view that the company's global revPAR growth can accelerate to 5.0% in both 2027 and 2028, up from our 3.2% estimate for 2026, which we have increased from 2.5%.

Hilton's development is industry-leading. We expect a 6.5% unit growth in 2026, aided by owners continuing to gravitate toward Hilton's brands, given its strong marketing, distribution, technology, and loyalty scale. We see an average annual room growth rate of 5.3% during 2026-35. Our forecast is supported by the company's pipeline of 541,300 rooms (as of June 30, 2026), which is a 6% increase year over year and accounts for 39% of its existing base. Our unit growth forecast is driven by just a few of Hilton's 27 brands currently in emerging markets like India and traction in the new premium economy brand Spark, the new extended-stay concept LivSmart, and the Small Luxury Hotels partnership. Our revPAR annual growth forecast for Hilton over the next 10 years is 3.6%. As a result, we estimate revenue growth to average 8% annually during the next decade. We project operating margins reaching 31% in 2035 from 17.4% in the prepandemic year of 2019.

We assign Hilton a wide moat rating, as its brand intangible assets and switching cost advantages have strengthened relative to the industry and peers. In our view, Hilton’s brand and switching cost benefits are evidenced by its portfolio scale, management expertise, loyalty program, and expansion into adjacent verticals.

Hilton’s owners are drawn to its brands. The hotelier spent $7.6 billion in 2025 on marketing, reservations, distribution, and loyalty, which buttress its brand intangible advantage. This outlay is multiples of those of narrow-moat peers. Also, we estimate the company already derives about 40% of its business directly through its low-cost app and website channels, which is about double the average hotelier, according to Euromonitor. This leads to lower distribution costs for third-party owners, showing the advantages of its brand awareness and scale. Further, we believe Hilton gets just a low-double-digit percentage of its bookings from the higher-cost online travel agency channel, compared with closer to 40% for the average hotel. Additionally, we believe it only pays around a single-digit percentage commission, whereas some independent owners pay 20% or more. Finally, the company has stated that its brand advantage enables partners to secure financing more easily and on better terms than if these owners weren’t part of its portfolio (unquantified), providing an additional cost benefit to owners.

The hotelier’s brand edge is also exhibited through its resilient and strong unit room growth, which averaged around 5% during each year COVID-19 had an impact (2020-22). This is well above the industry’s long-term average growth rate of 2% and speaks to the company’s strong brand advantage. We model the company’s annual room growth at 5% over the next 10 years, which is comfortably above our projection of 1%-2% US industry growth.

Hilton’s stout unit growth is driven by both franchisee and management relationships. Owners choose to outsource management responsibilities to Hilton because of its strong brand and management team with scale and expertise in reservations, financing, advertising, marketing, and labor management, which leads to strong revenue per available room, occupancy, and profitability. Hilton is one of just a few operators managing more than 100 hotels, with 873 as of Dec. 31, 2025.

Hilton’s brand is resonating not only with third-party owners but also with travelers, evidenced by one of the industry’s largest loyalty programs—250 million members as of Dec. 31, 2025. This is up substantially from 36 million in 2012, indicating that Hilton’s brands have increasingly resonated with a wider consumer base. Additionally, Hilton’s members are the most engaged in the industry, booking more than two-thirds of the company’s total room nights, compared with a low 60s figure in 2018 and above Hyatt, Accor, Choice, and Wyndham, which average below 50%. We believe one of the reasons Hilton sees more engagement from its loyalty members is that its complete price point offering allows those that might only be able to afford economy/midscale stays to earn points at those hotels and use them toward a special getaway at one of the firm’s many upscale/luxury properties in the future, an opportunity that doesn’t exist at narrow-moat peers.

Hilton’s brand is strengthened by its growing global portfolio across most price points. The company has 27 brands and 9,260 hotels, compared with 13 brands and 4,600 units in 2015. Recent brand introductions have focused on longer-term, midscale, luxury, and lifestyle stays. We believe entry into the midscale segment allows travelers into its ecosystem earlier in their income generation lifecycle, which they can work to retain with their leading and growing upscale and luxury offering. Hilton believes its recently launched midscale Spark brand has the potential to rival its Hampton brand, which reached about 3,200 hotels worldwide as of 2025. In our view, this expansion should augment Hilton’s solid luxury and upscale position, where its revenue share has grown to 15.5% in 2025 from 13% in 2018. This increased luxury and upscale presence is noteworthy, as we believe replicating scale in these segments is more challenging than at lower price points, given the consistent and reliable service required.

Not only do we see Hilton holding a brand intangible asset advantage, but we also see it enjoying a switching cost benefit, as its managed and franchised contracts are typically for 20-30 years with options to renew for five or more years, which compares with around 10-20 years for narrow-moat peers. Terminating these contracts requires significant expenditures to renovate and rebrand a property to meet the new brand specifications, resulting in disruptions to business operations and revenue loss for the owner, as well as higher cessation fees. Hilton’s strong brand and management expertise, along with these meaningful switching costs, results in low attrition of its managed and franchised customer base. In fact, attrition averages 1%-2% of its portfolio each year (below the mid- to high-single-digit percentage of narrow-moat peers), and this is usually at Hilton’s discretion, as after 20-30 years the hotel’s design or location may become too undesirable to maintain.

Hilton’s strong affirmation with both owners and travelers has translated to its global revenue share expanding to 6.3% in 2025 from 5% in 2018, trailing only Marriott’s 8.9%. Also, Hilton’s existing portfolio constitutes a mid-single-digit percentage of all industry rooms, with the company’s pipeline amounting to about 20% of the world’s under-construction room base, implying further share gains ahead. Regionally, Hilton holds a top revenue share position across all major international geographies, equating to a low-single-digit share. Meanwhile, Hilton holds the number-two revenue share position in the US with 20.2%.

Hilton’s mid-single-digit share of hotel industry rooms is set to increase as the company controls more than 20% of the rooms under construction in the global hotel industry pipeline.

The company is positioned to benefit from the increasing presence of next-generation travelers with emerging lifestyle and extended-stay brands Spark, LivSmart, Graduate, Undergraduate, NoMad, Home2, Outset, Curio, Canopy, Tru, Tapestry Collection, Motto, and Tempo.

Hilton has a strong loyalty program of 250 million members as of Dec. 31, 2025, constituting more than two-thirds of its total room nights.

Recent brand launches from competing hotel operators and home and vacation rental platforms present a competitive threat, and the advancement of technology and its use by next-generation travelers increase the access and awareness of these properties.

Hilton’s US hotels represent the majority of total EBITDA, exposing the company to an economic downturn in the US to a greater extent than competitors.

The unknown extent of the Iran war and inflation can present headwinds to demand in the travel industry.