Hilton sees big opportunity in inconsistent economy space

With 43% of the U.S. hotels sitting in the inconsistent economy segment, Hilton has a very long runway to sell its first entry into the premium economy space, conversion brand Spark by Hilton. Brand leader Alissa Klees told Hotel Investment Today that while last week’s brand launch came with some 100 deals in the pipeline, predominantly driven by existing Hilton owners, the expectation is to grow quickly and significantly with some 700 markets identified where Hilton doesn’t have a presence.

“The feedback from our recent global owners conference was ‘this is simple, this is smart and why didn’t we do this 10 years ago?’” Klees said of the brand with conversion costs in the $20,000/key range.

The lobby will serve as the breakfast hub featuring bagels with spreads.

ADR is projected to range from about $85 to the high 90s, according to Klees, with some hotels recording higher rates. She would not commit to a projected ROI on the investment but did say the timeline will be “variable and personal, based on their individual hotels, including the age of building, square footage requiring renovations, core infrastructure and more.”

Potential growth primarily targets secondary and tertiary markets, but Klees added that urban opportunities are also in the cards. “I spoke with the guys up in New York and our East Coast developers, and they are clamoring for this. They have deals for us to look at,” she said. “This brand will serve all markets, whether urban, suburban tertiary or even beach destinations where we have seen some early interest.”

What Spark will not do is develop from scratch, leaving those opportunities to Tru by Hilton and Hampton by Hilton. “We will be looking in the midscale category – aging assets that be coming up on the end of their license,” Klees explained, adding that even an aging Hampton or other internal brand properties could be candidates for Spark conversions. “Hotels in the midscale or economy space are going to be great candidates because the structure of those hotels, or the simplicity and the nature of what they’re delivering, match what we’ve tried to create in terms of a conversion package.”

Guestrooms will include simple, streamlined furniture, an open closet, a mini-refrigerator and a multi-purpose work surface.

Klees said about 60% of the conversion cost will go into guestrooms, 20% into the lobby area and 20% to the exterior with colorful walls and artwork. Guestrooms will include simple, streamlined furniture, an open closet, a mini-refrigerator, a multi-purpose work surface and bright bathroom. Complimentary breakfast will feature coffee, juice and a signature bagel bar with spreads. There will also be a 24-hour retail market.

Among the brand differentiators, according to Klees, is the requirement to complete a full renovation, including the tech stack, prior to joining the Spark by Hilton system to deliver a reliable and consistent experience.

Spark by Hilton brand leader Alissa Klees

Very cognizant of today’s inflation and supply chain issues, Klees said the Spark package has been boiled down to what Hilton calls the “thoughtfully essential,” what the traveler needs and what the owner will invest. “From a supply chain perspective, we partnered with Hilton Supply Management as the sole procurement agent for this brand,” Klees said. “The reason we did that was not only to make sure that we could negotiate and deliver the best cost possible to our owners but also the best timelines. We think this will with the value proposition of converting to Spark by Hilton.”

Klees added that the conversion process will take seven to eight months on average, depending on how fast the owner moves. “But we’ve really focused in on the parts that Hilton influences and controls, the design and supply chain process, and tried to streamline that so it doesn’t get in the way of an owner and we can deliver exactly what we’ve committed to deliver.”