Hilton's Demand Continues to Improve, as the Company Adds a Premium Economy Brand to Its Mix

While inflation presents a headwind 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—the human-ingrained desire to travel, 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 (including its premium economy brand, Spark, launched in January of 2023), 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. (69% of total 2022 hotel 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% long-term supply increase we estimate for the U.S. industry, implying market share gains ahead for Hilton.