Choice, Hilton innovate during expansion cycle
The striking lobby in the Cambria Hotel & Suites in New York.
In March, Choice Hotels announced a significant expansion for its Cambria brand, with 14 planned hotel openings in 2017 and 18 groundbreakings. For a brand with only 28 current units, it was a statement of confidence for both Cambria and the booming hotel industry as a whole.
After Choice first launched Cambria as its upscale, all-suite sub-brand in 2005, its ramp up comes on the heels of several years of planning as the hotelier located sites and struck deals for new locations.
Executives said Choice and Cambria locations as a whole were performing well, while the overall hotel industry continues its latest growth streak. The average daily rate for hotels in the Americas increased from $108 in 2012 to $123 in 2016, according to Statista.
“The executive team at Choice realized that we were coming into another up cycle, and made the commitment to really double down on the brand,” said Mark Shalala, vice president of development, upscale brands at Choice.
Shalala and Janis Cannon, SVP of upscale brands at Choice Hotels, said Cambria and the rest of the hotel industry are seeing the impact of the “Trump bump,” and the general growth of the U.S. economy.
Supply in the United States has grown by 1.9 percent, spurring continued developer interest in building more hotels, particularly on the upscale end of the spectrum.
This remains below the 2 percent long-term industry average, and is a significant distance from the 4 percent level that historically marks the end of a building cycle.
The success of recent Cambria openings made the decision for expansion even more appealing. In 2016, revenue per available room, also known as RevPAR, was at $128 for Cambria hotels opened in the last two years, while its entire portfolio ended the year at more than $100.
Most of this expansion will be focused on urban markets, where Shalala says the brand can keep up its focus of attracting both leisure and business customers. “It’s where our guests want to be. It’s also where the economics work,” he adds.
Shalala explains their target guests want to be close to entertainment venues, restaurants and bars, and generally choose to Uber to their destinations over driving.
Three brands for Hilton
As many hotel chains have experimented with dual-brand concepts in recent years, Hilton is taking its multi-brand concept to the next, most logical level. Hilton brass brought Hilton Garden, Hampton Inn, and Home2 Suites under one roof with a tri-branded hotel connected to McCormick Place in Chicago, the country’s largest convention center.
Hilton’s foray into the multi-branded world started by combining an All Suites brand, like Homewood Suites, with a “focused service” brand, like Hampton or Hilton Garden Inn.
Hilton soon began to expand the offerings, pairing focused service with full service, and increasing the variety of hotel brands included, which brought their multi-branded portfolio to 60 units throughout North America.
“We needed different options as we went into different locations and different business needs, demand generators and brand availability,” said Bill Duncan, global head of All Suites.
As the dual-branded locations expanded and boosted development in its promise of space efficiency, Duncan said the shift to a triplex was a natural step. The business clientele attracted by McCormick Place proved promising for the tri-branded location’s potential growth. It was a natural fit for Hilton, but Duncan says he’ll remain cautious with the tri-branded approach going forward.
“We’re going to be very selective about where we would replicate this,” Duncan said. “You’d have to have the right partner, and the right location.”
The right partner for this project, Duncan said, is First Hospitality Group, a third-party hotel management team. FHG has been working with the Hilton family for over 30 years, dating back to their first Hampton Inn development in 1985. When Bob Habeeb, CEO of FHG, was approached with the idea, he said it immediately made sense to him.
“With the multi-brand you can take a big site in an urban location that might otherwise be cost prohibitive, and make it work,” Habeeb said. “You also have these brands that very much complement themselves.”
Dual-branded locations provide significant cost savings in combined amenities, and Duncan believes the tri-branded location will further boost those savings.
So what’s next for the Hilton brand? Could they make the jump to four, or even five hotels under one roof? Duncan says he’ll have to take a step back before that happens.
“We’ll get our sea legs with this triplex first before we go that route,” Duncan said.
“We want to make sure we get this right before we start thinking bigger, more complex.”
The new development is planned to open in late 2018.