We See Hilton's Demand Improvement Continuing in 2023, Despite Economic Headwinds

While the coronavirus pandemic and inflation present headwinds to industry travel demand in the near term, Hilton’s brand intangible asset (which underlies its narrow moat rating) is strengthening, along with improving travel demand, aided by industry tailwinds—pent-up demand, service consumption normalization, and remote work flexibility. We expect Hilton's room share expansion to be among the industry's fastest over the next decade because of an industry-leading pipeline, favorable next-generation traveler position supported by newer brands, and its highly rated loyalty program. The company currently has mid-single-digit share of global hotel rooms with 15%-20% share of all industry pipeline rooms under construction. Further, its U.S. (70% of total 2021 room count) share of existing rooms is low double digits, with a pipeline share of rooms under construction at 20%-25%. We see Hilton's room growth averaging mid-single digits over the next decade, above the 1.8% supply increase we estimate for the U.S. industry, implying market share gains ahead for Hilton.