Hilton said on Thursday it will buy Graduate Hotels from Adventurous Journeys Capital Partners for $210 million (€192 million), marking its first brand acquisition in over two decades as pressure in the hotel industry creates opportunity for consolidations.
Hilton said it believes the addressable market for the Graduate brand that primarily caters to locations near major colleges and universities in the United States and the United Kingdom, is 400-500 hotels globally.
Graduate Hotels
"University towns tend to have steady demand, from students, parents and visiting academics, largely unconnected to the global economy," said Richard Clarke, analyst at Bernstein.
Hilton's shares were up marginally during premarket trading after the announcement of the deal with Graduate Hotels, which has only about 35 operating and pipeline properties.
Modest Acquisitions
CEO Chris Nassetta had said during the Hilton's fourth-quarter earnings call that "more stress in the system than normal" presented more opportunity for modest acquisitions.
The transaction is expected to close in the second quarter, and Hilton sees the fee contribution for the first full-year of ownership to be about $16 million (€14.6 million).
2024 Predictions
In February, Hilton Worldwide reported a rise in fourth-quarter revenue as demand for group and conventional business travel surged.
Total quarterly revenue was $2.61 billion (€2.42 billion), up 6.75% from a year earlier.
Hilton projected 2024 net unit growth to be between 5.5% and 6.0%, compared with a year earlier.
Market Expectations
Hilton Worldwide in February forecast full-year profit that fell short of lofty market expectations as travel demand normalises after beating analysts' estimates for fourth-quarter earnings.
US hotel operators benefited from pent-up leisure travel demand in the years following the pandemic but this quarter Hilton said it benefited from higher licensed fees and the recovery of group and convention travel.
Leisure Demand
Leisure demand in the US was flat with difficult year-over-year comparisons, the company said.
Meanwhile, total expenses jumped 13.8% to $2.2 billion (€2.2 billion) in the fourth quarter.
