Hilton Worldwide to spin off timeshare division, hotel real estate

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The Hilton Chicago.
The Hilton Chicago.

Hilton Worldwide will spin off its Hilton Grand Vacations timeshare division and about half of its real estate holdings into separate companies, focusing on its management and branding operations.

Hilton will include about 70 properties totaling about 35,000 rooms (about 5% of its total room count) in a real estate investment trust (REIT) that will be “a high-quality portfolio of luxury and upper-upscale hotels located in higher barrier to entry urban and convention markets, top resort destinations, select international hotels and strategic airport locations,” Hilton CEO Christopher Nassetta said on a conference call with analysts on Friday.

The spinoff its Hilton Grand Vacations timeshare unit will include almost 50 club locations. Hilton will retain long-term licensing agreements to market and sell the resorts under the Hilton Grand Vacations brand.

“By simplifying our business, each segment should benefit from a dedicated management team with the capital and resources to take advantage of organic and inorganic growth opportunities,” said Nassetta.

Hilton is slated to complete both spinoffs by the end of the year.

Marriott spun off its timeshare division in 2011; Starwood said last year that it would spin off its timeshare unit.

Hilton's fourth-quarter profit jumped fivefold because of a one-time tax benefit of $814 million and higher operating profit. Revenue grew 1%, to $2.86 billion. Hilton’s revenue per available room (RevPAR) rose 3.7% from a year earlier, with the Conrad, Embassy Suites and Home2Suites brands leading the way. Hilton forecasted RevPAR growth will slow to about 4% in 2016, down from 5.4% last year.

Nassetta said its new Tru midscale brand has more than 160 development agreements; the first hotels are due to open by early next year.

“The brand’s innovative design will appeal to a broad range of customers, with a price point 25% lower than Hampton,” Nassetta said. “Its tightly engineered design, relatively small footprint and lower development costs should drive very attractive returns for hotel owners.”

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