Sep202013

Hilton vs. Twitter IPO

Forbes has an interesting article published this week by Carole Tice on Twitter IPO versus Hilton IPO: How They Stack Up. There are a couple of points made in the piece I want to share. The bottom line of the article is an online business can grow and then fall out of favor when a better program comes along. There is less risk with Hilton Hotels stock.

Twitter is seven years old. Twitter has 200 million users. I started using Twitter in 2008. Twitter is a virtual business. Popularity is the key to survival in the online business world.

Conrad Hilton bought his first hotel in 1919. There are now 4,000 Hilton brand hotels around the world. These are literally concrete assets, barring disasters that reduce the value of the hotel. Hilton has 125 million customers per year with 38 million loyalty members of Hilton HHonors.

Hilton hotel brands thrive even when many loyalty members swear off the chain after the point devaluations that come over and over again. Hilton is hard to ignore as the elephant on the lodging block, unless you are going to choose Marriott or IHG as the alternative big beasts of the hotel world.

Hilton is a $1.25 billion IPO giving the hotel company an estimated value of $30 billion. Hilton will offer the largest IPO for a lodging chain, beating out Hyatt’s 2009 $1.09 billion IPO record.

Blackstone Group in October 2007, made a leveraged buyout of Hilton Hotels Corporation for more than $18 billion plus $7 billion in assumed debt (WSJ – Sep 10, 2013) and Bloomberg Sep 12, 2013 article cites Blackstone’s cost for Hilton in 2007 at $26 billion. Apparently, in 2010 Blackstone negotiated $4 billion off the debt with creditors. Blackstone is planning to refinance $13.5 billion of Hilton’s remaining debt with $3.5 billion in Commercial Mortgage Backed Securities (CMBS) in what is anticipated to be the largest CMBS deal since the financial crisis of 2008. That’s all bank talk to me.

From the Hilton HHonors guest point of view the developments seem to indicate Hilton will have far more cash flow and that potentially can mean better promotions to maintain a positive spin on the Hilton brand. Positive chatter on social media could be good for the public offering of Hilton stock when it hits the market in 2014.

And good loyalty promotions, contests and sweepstakes help create positive brand publicity. I think 2014 might be a better year for Hilton HHonors guests.

We will see.

Lodging shares are trading in 2013 at their highest since 2007.

Net income at Hilton rose to $352 million in 2012 on $9.3 billion in revenue.

Twitter is estimated to have had $583 million in advertisement revenue in 2013.

I particularly like this section of the Forbes article:

Hilton’s secret weapon for growth

Where Hilton really shines compared to Twitter is in its growth strategy and the sophistication of its growth plan. While Twitter continues to grapple with how to monetize its audience — without pissing off users and driving them away with too many ads — Hilton has more than 665,000 hotel rooms open now, 170,000 of which opened in the past five years. Another 176,000 hotel rooms are in development, the most of any hotel chain.

Forbes Sep 17, 2013

News Sources:

Forbes Sep 17, 2013 – Twitter IPO versus Hilton IPO: How They Stack Up.

Bloomberg Sep 12, 2013 – Blackstone’s Hilton files for $1.25 Billion IPO in U.S.

Wall Street Journal Sep 10, 2013 – Blackstone Revisits Its Debt Plan for Hilton Expected $3.5 Billion Mortgage-Backed Securities Deal Will Test the Market, Which Has Become More Volatile Lately

 

Ric Garrido, writer and owner of Loyalty Traveler, shares news and views on hotels, hotel loyalty programs and vacation destinations for frequent guests. Check out my page of collated current hotel promotions.

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About Ric Garrido

Ric Garrido of Monterey, California started Loyalty Traveler in 2006 for traveler education on hotel and air travel, primarily using frequent flyer and frequent guest loyalty programs for bargain travel. Loyalty Traveler joined BoardingArea.com in 2008.

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