Hilton Worldwide Holdings Inc. HLT is likely to benefit from unit expansion efforts, hotel conversions and a loyalty program. A focus on the asset-light business model also bodes well. However, an uncertain macroeconomic environment is a concern.

Growth Catalysts for HLT Stock

Hilton continues to drive unit growth to remain the fastest-growing global hospitality company. In the second quarter of 2024, Hilton opened 165 new hotels. It achieved net room growth of 18,000 rooms. The company signed 63,000 rooms in the second quarter, increasing its pipeline to approximately 508,000 rooms, up 8% from the previous quarter and 15% year over year. Hilton Garden Inn continued gaining significant traction, with year-to-date signings up nearly 90% across 20 countries.

Hilton is focused on hotel conversion opportunities to drive growth. During the second quarter, conversions accounted for over half of the signings, driven by acquisitions and partnerships, with conversions alone making up 25% of the quarter's signings. System-wide construction starts in the quarter were up 160% year over year and 37% excluding acquisitions and partnerships. As of June 30, 2024, Hilton's development pipeline comprised nearly 3,370 hotels, with almost 508,300 rooms across 136 countries and territories — including 39 countries and regions where it currently has no running hotels. For 2024, the company expects net unit growth in the range of 7-7.5%.

Hilton’s asset-light, fee-based business model continues to be a significant advantage, allowing the company to generate substantial free cash flow. By avoiding heavy investments in property ownership, Hilton has focused on franchising and management fees, enabling the company to scale globally while minimizing risk. This model has provided consistent revenue streams and meaningful shareholder returns, including dividends and stock buybacks. So far this year, Hilton has returned $1.8 billion to shareholders and expects to return around $3 billion by the end. With consistent cash flow and commitment to returning capital to shareholders, holding Hilton stock can be seen as a reliable strategy for steady returns.

One of the most extensive loyalty programs, Hilton Honors, created a precious asset for the company. Innovations like the Hilton Honors app continue to drive the program’s growth. With membership levels increasing 18% on a year-over-year basis (as of the second-quarter 2024), the company continues to outline opportunities to engage its Honors members through enhanced partnerships and points redemption offerings. The company intends to focus on new opportunities to drive customer engagement to reach pre-pandemic levels.