Project H3 brand leader Isaac Lake talks about how unmet consumer travel needs and untapped profit potential fueled the launch of Hilton’s lower midscale offering for the long-stay guest.
While the COVID-19 pandemic sent most of the world’s travelers home for the indefinite future, a significant, vital workforce sector continued to travel simply because they had to. Professionals such as traveling nurses, military personnel, infrastructure investment teams and construction crews generated bookings that kept many affordable hotels’ lights on – particularly in the highly active extended-stay sector.
Without the noise of the typical waves of corporate transient and MICE travel, demand from this niche travel market pointed to a growing but unmet need for a new kind of longer-stay hospitality brand.
“When we really looked at what was happening during the pandemic, we noticed that there were sizable groups of travelers who never stopped traveling,” said Isaac Lake, brand leader for Project H3. “And when we explored that further, we discovered this untapped $300 billion workforce travel market comprised of people who were staying at a hotel for 30, 60 or 90 days, and sometimes longer.”
Data also showed Hilton that these guests were proactively choosing to stay at hotels rather than renting apartments. “Our research revealed that they didn’t want the hassle of signing a lease, setting up a cable and internet contract, arranging trash pickup, signing up for a gym – all of the things necessary with a long-term housing commitment,” Lake said. “We also saw that these guests had very specific needs which weren’t being met by existing hospitality products. So, we created a product tailored specifically for this travel segment.
Delivering a new market, untapped profit potential to owners.
The building of what’s currently referred to as Project H3 (pending the trademark approval of a permanent brand name) was equally customized to reflect the requirements of owners and developers.
Lake said that although the success of Hilton’s existing extended-stay flags showcased strategies and efficiencies that could translate to this long-stay brand, it quickly became clear to Hilton’s team that the new brand couldn’t just be a business-as-usual extended-stay concept with a few extra dishes.
“This is a unique traveler for us,” explained Lake. “Developers have been telling us for years that they wanted a product at this price point and we’re creating some disruption in the segment with this brand.”
That disruption has already helped the new brand stand out and develop early interest. Project H3 boasts more than 400 future sites either submitted to the brand or in the process of being submitted, according to Lake. “Based on consumer demand and investor interest, this will be Hilton’s next mega-brand,” he predicted.
Filling a blank canvas
One of the key drivers behind Hilton’s decision to enter the long-stay category with Project H3 was recognizing the opportunity to elevate the product. From uncomfortable beds, less-than-ideal room layouts and poor soundproofing, many of the existing extended-stay hotels in the segment reportedly offered uninspiring accommodations.
“Many of the existing properties lack any sort of imagination at all,” said Lake, who stayed 30 nights in the competitive sets’ properties. “When we enter a new space, we really think about innovating and designing something that will really capture guests who appreciate what a Hilton product provides.”
In fact, many aspects of the Project H3 concept break the mold, in hopes of better catering to the needs and preferences of long-stay guests. Lake explained that usually, when guests walk into an extended-stay room, the room layout is fairly predictable: There's a kitchen, workstation and TV lined up on one wall with the bed along the opposite wall.
On the other hand, the Project H3 room opens into a large, galley kitchen, with a full-sized refrigerator, two-burner stovetop and dishwasher, as well as home-like essentials such as pots, pans, plates, glasses, silverware and paper towels. Beyond the kitchen, the design transitions to living and sleeping areas.
“We're creating unique senses of space throughout the guestroom, kitchen and bathroom that are very different from anything that anyone else has done,” said Lake.
But giving guests “more” does not mean owners profit less. “We did a lot of things to make this brand very, very efficient to build,” said Lake. “We reduced the number of ceiling cans where it made sense and created a new type of plug-in wall sconces so you can run fewer electrical wires in the walls. We're also doing luxury vinyl tile throughout as opposed to carpet because the vinyl tile has a longer life for developers – typically around 14 years. We also designed the bathroom at 55 square feet instead of 57 square feet, which would have required the installation of another sprinkler head. Thoughtful decisions like these throughout the guestroom give Project H3 a competitive advantage for owners and developers.
Based on consumer demand and investor interest, this will be Hilton’s next mega-brand.
Isaac Lake
Hotel operations will be equally efficient. Project H3 will offer weekly housekeeping and a grab-and-go breakfast to eliminate the need for a back-of-house kitchen. Lake said this brand is intended to operate with a super-lean staff of six to 10 full-time employees.
Amenities: Out in the open
This philosophy also extends to Project H3’s common areas and amenities. A radical rethinking of design concepts means guests can expect a comfortable and functional environment for long-term stays when choosing Project H3 properties.
For example, the brand has a creative take on guest laundry facilities, putting them front and center, with storefront windows that create a bright and inviting space. There are places to sit down and watch TV, as well as stations for ironing and steaming clothes. “We've created a space where guests will want to hang out and actually wait on their laundry, because they have something they can do and have a place to be,” said Lake
Similar upgrades can be found inside Project H3’s fitness centers. Research indicates that more than 70% of guests staying for 30, 60 or 90 days make buying decisions based on fitness centers, after guestroom and location. Hilton will satisfy that criteria by providing a range of workout equipment including multiple treadmills and elliptical machines as well as free-weights.
Even exterior spaces and common areas are part of the Project H3 experience. Long-stay travelers often value a sense of community and social interaction, so creating a unique outdoor gathering space was an especially key objective according to Lake.
“We're going to have at least two grills outside for guests. We’re going to give them a fire pit and we’re going to provide tons of soft seating and a space for them to hang outside,” Lake said.
Targeting 700 to 800 markets
Lake believes Project H3 is headed for a fast growth track. “Ultimately, this brand is going to go where owners and developers see the demand generators and, in our research, we saw those demand generators are everywhere.
Lake said the scope of this market lends itself to flexibility for owners. “For example, in some markets there may be a higher mix of queen-queens. We’ll flex with owners on that, but what we won’t flex on would be a fundamental design change such building a big conference center. That’s not the essence of this brand,” he added.
As for the first opening, Lake said, “There’s a little bit of race going on. The build time is 12 to 14 months, so we should have something open by late Q3 or early Q4 next year. From the interest we’ve had from developers, owners and guests, we really think this brand is going to go big and go fast.”
Brendan Manley is a writer, editor and digital marketer specializing in hospitality content creation based in Warrensburg, New York.
The views and opinions expressed in this column do not necessarily reflect the opinions of Hotel Investment Today or Northstar Travel Group and its affiliated companies.