Hilton’s CEO, Christopher Nassetta, disclosed during the first quarter earnings call that they are working on an extended stay mid-scale brand that should be ready to launch in the next 30 to 60 days.
This new brand, Hilton’s 20th or so, will cater to those staying, on average, 20 to 30 days, and should be very profitable for the developers due to cheap construction and few employees required.
You can access Hilton here.
READ MORE: Hilton Honors Rate & Bonus Points Offers
Possible Brand Names:
I went through Hilton’s recent trademark filings, and quite a few were filed recently. Based on the earnings call, the closest one would probably be the Livsmart Suites.
It is clear that Hilton is working on a “suite” brand based on the trademarks in the process; Dwelling Suites, Suitely, Dvelve Suites, Adapt Suites, Belong Suites, H3 Suites, Suite Start, and Pixel by Hilton, Gleam by Hilton, and Twilo by Hilton.
Relevant Parts of the Earnings Call:
We’re getting ready to launch another brand sort of at the — in the extended-stay space at the lower end, mid-scale, very low end of mid-scale, below home to that we have — we’ve been working with our ownership community and customers on that while it will be a newbuild product, it will be a very efficient build cost.
So again, the things — my history of this living through The Great Recession, all that is your lower cost to build products that have — that are very high margin because people make the most money doing it and they’re the lowest risk and they’re the easiest financed. Those are the ones that get going the fastest. And so again, we didn’t develop this brand that we’re getting ready to launch, hopefully, in the next 30 or 60 days because of this. We launched because customers want it, owners want to build it. But again, it won’t have any effect this year but starting probably the latter part of ’24, more likely ’25 as people look at a brand that can deliver just astronomical margins on a very efficient per unit build cost, we think it will build a lot of excitement.
And:
And so the fundamentals we think are just great. The way I think about the product that we’re developing, and I’m getting ahead of myself, but it’s coming really soon. I mean, down we have — we’ve built it. We’ve done 99% of the work. It’s almost a hybrid. It’s like an apartment efficiency meets hotel. And I’d say it’s almost like 60-40. It’s more apartment efficiency. There’s so many workforce housing needs that are just unmet with this kind of product for somebody who needs to be somewhere 30, 60, 90, 120 days.
So you’re talking about average length of stay of probably 20 to 30 days on average versus most of the core extended-stay brands are like 5 to 10 maybe, somewhere in that range, if you look at the industry. So it’s a different demand base, different types of locations, which is why we love it because we’re not serving it, meaning it’s not competitive with what we’re doing with Home2 and certainly not competitive with Homewood because it’s serving a totally different need, mostly in totally different markets. And as I said, we — I didn’t intend to go this far, sorry.
But this is hundreds and hundreds and hundreds of hotels over time. This is not like we’re going to do 50 or 100 of these. I mean, you’ll wake up over time in 10 years, and will — it will be like Home2. We’ll have 4, 5, 6. We’ll have a lot of these because we think the need is there now and growing.
And our system delivers. The system delivers the highest market share in the business. So if you’re an owner thinking about I’m going to build a similar product somewhere else, I mean, you’re going to look at the system strength. And ultimately, I think, historically, people vote with their feet. They vote with a product that they think will work better from a customer point of view, ultimately, higher margins and drive higher share.
Home2 Suites Is a Very High Margin:
Home2 has been off the hooks in demand throughout all of COVID and otherwise because people make — such customers love it, it’s very high margin. We think customers are going to love this. It’s something different. It’s at a lower price point. But the margins are much even higher than that. And so again, it will take time to gestate that, but we think that is a mega brand opportunity for us that as we think about more likely ’25, ’26, even in an environment that’s been more challenging — is more challenging from a financing point of view, as the financing markets come back and they always do, it’s those products that really get done fastest. And so we feel good about being around 5 and headed back to 6 to 7 over the next couple of years, and it will be a combo platter of all of those things that you said and that I just spoke to.
Conclusion
The Hilton Honors benefits at this soon-to-be-launched extended stay brand are likely minimal and point earnings at or lower than at the Home2 Suites, which was referred to several times during the earnings call.
Hilton expects to have hundreds of these lower-end midscale extended stay hotels in a few years, as it is easier to sell to developers who can get these financed from local and regional banks.
You have to keep in mind that we all love to stay at full-service and luxury hotels, but the bread and butter business for most of these chains is really the select service and lower-end properties; when you look at the number of hotels under various brands (45 Conrad hotels versus 2,863 Hampton Inns).