Skift Take

We're just excited that Hilton is launching a midscale brand rather than another lifestyle brand.

Hilton Worldwide Holdings Inc. rose the most in three months after the hotel company reported second-quarter earnings that beat analysts’ estimates and said it will begin paying a dividend.

Adjusted earnings per share rose to 25 cents from 21 cents a year earlier, the McLean, Virginia-based company said in a statement Wednesday. The average estimate of 19 analysts was for 23 cents a share. Hilton, which went public in December 2013, said it will pay a quarterly dividend of 7 cents a share.

Hilton’s earnings report reassured some analysts who were concerned that disappointing results by lodging real estate investment trusts including LaSalle Hotel Properties might be a sign of flagging demand in the industry. Carlo Santarelli, an analyst with Deutsche Bank AG, said Hilton’s strong quarter makes it an attractive entry to the hotel market for investors.

“We believe the report should be very well received and soothe burgeoning concerns about a near-term slowdown fueled by a few hotel REITs that recently reported,” said Santarelli, who has a buy rating on the shares.

Hilton rose 3.4 percent to $27.40 at 1:22 p.m. in New York. It earlier climbed as much as 5.4 percent, the biggest intraday gain since April 29.

Midscale Brand

Hilton, which operates brands including DoubleTree and Homewood Suites, said in April that it’s starting a new midscale label. On Wednesday, Chief Executive Officer Chris Nassetta said the new brand, set to debut in early 2016, will target customers that the company’s current properties aren’t capturing and eventually may be larger than Hilton’s Hampton chain.

The Hampton hotels were originally intended to be midpriced but became more expensive over time, Nassetta said on a conference call with analysts.

“There is no good midscale product” on the market right now, he said. “That’s why we’re doing it.”

The effort over the long term would be the biggest midscale push by a major U.S. hotel company, said Patrick Scholes, a lodging analyst at SunTrust Robinson Humphrey Inc. The new properties will probably be focused around highway exits and near airports, he said in an interview.

Hilton has “a very good track record of brand introduction,” Scholes said. “There’s a demand for Hilton-branded properties, and you can only build so many Hampton Inns and Garden Inns.”

The company’s second-quarter revenue rose to $2.92 billion from $2.67 billion a year earlier. Revenue per available room, an industry measure of rates and occupancies, increased 5.2 percent when adjusted for currency fluctuations.

For the full year, Hilton expects revpar growth of 5 percent to 7 percent, according to the statement. The company forecast full-year adjusted earnings of 80 cents to 84 cents a share, up from its April projection of 79 cents to 83 cents.

This article was written by Chloe Johnson from Bloomberg and was legally licensed through the NewsCred publisher network.

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Tags: hilton

Photo Credit: Hilton's midscale Hampton Inn brand will see a sister company in its market starting in 2016. Innisfree Hotels / Hilton Hotels