The recently opened Resorts World Las Vegas gives Hilton 3,500 new rooms on the Strip.
Ethan Miller/Getty ImagesHilton Worldwide Holdings is barely a blip on the Las Vegas Strip, which is dominated by MGM Resorts International and other casino-resort companies.
But Hilton (ticker: HLT) just added 3,500 rooms to its Las Vegas footprint, thanks to the recent opening of Resorts World Las Vegas—the first new resort on the Strip in more than a decade.
“This gives us a very important destination to better serve customers,” Hilton CEO Christopher Nassetta told Barron’s in a recent interview, referring to leisure as well as group and event travelers. The latter includes the convention and trade show business, which were hard hit by Covid and continue to lag behind other types of travel, though there are some early signs of recovery.
The sprawling Resorts World Las Vegas, which includes a 117,000-foot casino, around 70,000 square feet of retail space, and a sizable meeting space, is owned and operated by Genting Group, a large company with a big presence in Asia. It opened June 24.
Hilton, which has a fee-generating franchise agreement with Genting, has three brands at the resort including its flagship Hilton Hotels & Resorts with 1,774 rooms and suites there. The other two are Conrad Hotels & Resorts (1,496 units) and ultra-luxury LXR Hotels & Resorts (236 units).
“You have to open up a whole a lot of Hilton Garden Inns to equal what they are getting in those [three] properties in Vegas,” says Bill Crow, a lodging analyst at Raymond James, referring to the company’s midprice brand.
Hilton operates an asset-light model in which it owns few properties, relying more on franchise and management fees, as Barron’s pointed out in a bullish take on the stock in early February.
“Not only do we get 3,500 brand-new rooms across from the [Las Vegas] Convention Center on the Strip, but it’s with a third-party partner investing the capital, rather than using our own balance sheet,” says Nassetta.
The stock, at around $121 recently, has appreciated about 8% since that Barron’s article, trailing the S&P 500’s 10% result. Crow has a Buy rating on the shares, with a $135 price target.
Hilton, based in McLean, Va., is no stranger to Las Vegas, in part because it already had a relatively small presence on the Strip that includes a Waldorf Astoria and a DoubleTree property that’s part of the Tropicana resort. It also has various other properties in the market attached to brands such as Embassy Suites and Hampton Inn.
Under one of its former CEOs, Barron Hilton, who died in 2019, the company had a big presence in Sin City roughly half a century ago with properties like the Las Vegas Hilton where Elvis Presley and others performed.
That particular property ended up being sold, and the company’s presence had diminished there.
In more recent years, as the city’s growth has been powered by casino-resort operators like MGM Resorts International (MGM) and Caesars Entertainment (CZR), there hasn’t been that much room for brand hotel companies to operate, much less expand.
For Hilton, the Genting venture marks an important step in its effort to beef up its presence in Vegas.
One of the benefits of its franchise agreement: The company’s roughly 120 million Hilton Honors rewards members now have another place to stay in Vegas. “All these people who are earning points in Boise and Grand Rapids can cash them in in Vegas,” says Crow.
And the additional fee income from the Strip gives Hilton more chips to play at the table.
Write to Lawrence C. Strauss at lawrence.strauss@barrons.com
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June 29, 2021 at 09:03PM
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Hilton Adds 3,500 Rooms on the Vegas Strip. And It Doesn't Have to Cover Upkeep - Barron's
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