Hilton, one of the world's largest hospitality companies is making a big move to separate its assets into a publicly traded entity. Reports as of Dec. 16, according to Forbes, indicate that Hilton plans to spin-off its hotel properties into a Real Estate Investment Trust (REIT). In fact, the company has already applied for a tax-free spin-off. The news received a positive response from the market as the shares was up by 5.2% before closing at $22.45 on Dec. 16.
After the spin-off plans are executed, Hilton will still operate its management and franchise segment consisting of 4,333 hotels with 677,960 rooms and its timeshare business, which consists of 45 properties comprising 7,152 units. Meanwhile, the formed REIT would probably own or lease 147 of Hilton-branded properties/hotels across the world, including Hilton Chicago, Hilton San Francisco Union Square and Hilton Hawaiian Village Waikiki Beach Resort.
This plan was hinted when the company conducted the 4Q14 earnings conference call, Forbes continues. It aims to explore possibilities in real estate that would help and support its existing shareholders. More update on this is expected to be released during the 4Q15 earnings conference call.
Hilton's President and CEO, Christopher Nassetta, who used to head Marriot before he took over Hilton. Marriot then spun its assets to Host Hostels and it seems that Nassetta is adapting the same strategy for Hilton, which generates 60% of its revenues from the 147 hotels it owns and leases and once the spin off commences, the earning will be driven from derive earnings from hotel room rentals, food and beverage sales and other service.
The first step was taken when it sold the Waldorf-Astoria Hotel in New York for $1.95 billion in FY14.
Hilton operates through three segments: management and franchise, ownership and timeshare and to entice customers, they offer a loyalty program that provides free hotel accommodations anywhere in the world.