Check In to Hilton With Blackstone for the Long Term

NEW YORK (TheStreet) -- The world's largest hotel chain owner, Hilton Worldwide Holdings (HLT), backed by the private-equity firm Blackstone Group (BX), recently raised $2.35 billion at its initial public offering, thus becoming the biggest IPO in the lodgings industry, breaking Hyatt Hotel's (H) record of raising $1.1 billion at its debut in late-2009.

Hilton's shares closed at $21.60 on Friday, which puts a market cap of $21 billion on the business. Its shares are trading just 2.3 times trailing sales and 28 times next year's earnings estimates, which makes the stock extremely attractive considering the much higher industry's average numbers as well as Hilton's powerful brand and growth prospects.

The company's new CEO, who came around six years ago, has done an excellent job in cost cutting and with the growth of the project pipeline. The business has delivered strong growth over the last six years, including significant growth in international markets, in contrast to the industry's sluggish environment.

Although Hilton doesn't have a healthy balance sheet, it is heading in the right direction. The business has the leadership position in both international and domestic markets. Despite the IPO, it appears that the Blackstone Group has made a long-term commitment as it is not going to sell any of its shares, in the words of Blackstone's Chief Executive, Stephen Schwarzman, for "many years." And I believe you should do the same.

New York-based Blackstone acquired Hilton for $26 billion in 2007. Since then, the hotel chain has delivered an impressive performance, despite the overall industry recession.

After the acquisition, Hilton got hold of a new CEO, Christopher Nassetta, whose cost-cutting measures, international expansion and a shift toward a more lucrative franchise model fueled the company's growth.

The performance of Hilton Worldwide is evident in its industry-leading numbers, which are in stark contrast to the general downward trend witnessed by the hotel sector.

A look inside Hilton's Securities and Exchange Commission filing reveals that for the six years ended in June, the company saw a 34% increase in the number of open rooms, which is the highest for any major lodgings company. The number of rooms in its development pipeline rose 52% to 176,000; nearly all of these are in its higher margin segments. The total number of rooms under construction rose 121% to 92,000, also an industry-leading figure.

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