Hotels, Airbnb and all that debt
- Adam Edwards
- Jan 20
- 3 min read
I thought it'd be interesting to look at companies that help offer us somewhere to stay when we're travelling and see how their debt levels differ. I've gone for Booking.com and Aibnb which are tech platforms, Hilton and Marriott (two hotel chains) and Apple Hospitality and Vici Properties which both own and manage hotels as REITS.
Company Analysis
Airbnb, Inc.
Airbnb operates with minimal debt, reflected in its low liabilities and negative debt growth. The company primarily relies on equity financing, suggesting a conservative financial strategy that prioritises flexibility and minimises interest expenses. This approach reduces financial risk but may limit expansion potential compared to debt-financed competitors.
Apple Hospitality REIT, Inc.
Apple Hospitality REIT balances assets and liabilities, with moderate debt growth over different periods. This indicates a structured approach to leveraging debt for real estate acquisitions while maintaining financial stability. The company’s controlled debt-to-equity ratio suggests it focuses on long-term sustainability rather than aggressive expansion.
Booking Holdings, Inc.
Booking Holdings relies heavily on debt, with significant liabilities compared to equity. Its high debt growth suggests an aggressive expansion strategy, likely through acquisitions or infrastructure investments. This approach can drive rapid growth but increases financial risk if revenues decline or economic conditions worsen.
Hilton Worldwide Holdings, Inc.
Hilton’s capital structure is typical of the hospitality industry, with high debt levels financing its extensive property portfolio. Moderate and consistent debt growth suggests a controlled leverage strategy. While this enables expansion and property investments, it also increases financial obligations, requiring strong cash flows to maintain sustainability.
Marriott Vacations Worldwide Corporation
Marriott Vacations exhibits concerning debt metrics, particularly its high debt/EBITDA and debt/FCF ratios. This suggests that while its total debt may not be the highest, its ability to service debt from operational earnings is weak. The company’s strategy appears overly leveraged, posing risks if cash flows decline.
VICI Properties Inc.
VICI Properties has the highest asset and liability levels, reflecting its real estate investment model. Its extreme debt growth over five years suggests aggressive expansion through acquisitions. While this fuels rapid growth, it increases financial leverage risks, especially in periods of market downturns or liquidity constraints.
Comparative Analysis: Debt Strategies and Financial Risk
A comparison of these companies highlights stark contrasts in debt usage, capital structure, and financial sustainability. Airbnb stands out as the most conservative, avoiding debt in favour of equity financing. This approach minimises financial risk but may limit its ability to scale as rapidly as debt-financed competitors. In contrast, Booking Holdings and VICI Properties exemplify aggressive debt strategies, using high leverage to fund expansion. While this can yield substantial growth, it increases vulnerability to economic downturns and interest rate fluctuations.
The hospitality-focused firms, Hilton and Marriott Vacations, adopt debt-heavy models common in the industry. Hilton maintains a more controlled debt growth, allowing steady expansion while managing risk. Marriott Vacations, however, raises concerns with its exceptionally high debt/EBITDA and debt/FCF ratios, indicating weak debt servicing capacity. This places it at higher risk if profitability declines, potentially impacting liquidity and operational flexibility.
Apple Hospitality REIT presents a balanced approach, leveraging debt to acquire properties while maintaining a sustainable debt-to-equity ratio. This strategy mitigates financial risk while enabling steady expansion, contrasting sharply with VICI Properties, whose extreme debt growth suggests a more aggressive, high-risk real estate investment model.
Overall, the analysis underscores that while debt can fuel expansion, excessive reliance on leverage—particularly when earnings fail to keep pace—can compromise long-term financial stability. Companies with moderate, well-managed debt like Apple Hospitality REIT and Hilton may achieve sustainable growth, whereas those with excessive leverage, like Marriott Vacations and VICI Properties, face higher long-term financial risks.