MIAMI—A lack of extended-stay hotel rooms in Latin America and the Caribbean region is giving executives of Hilton Worldwide Holdings visions of extending their Homewood Suites by Hilton brand.
“Most of the competition has been along the lines of corporate apartments, so there’s a significant opportunity to bring extended stay to the market,” said Bill Duncan, global head of brand management for Homewood Suites by Hilton and Home2 Suites by Hilton, while attending the recent Caribbean Hotel & Resort Investment Summit and Hotel Opportunities Latin America Conference.
The Homewood Suites leader and his development team are looking for locations to expand the brand’s existing 350-hotel footprint (41,500 suites). The Homewood Suites flag flies at one property in the region—a hotel that opened in 2005 in Torreón, Mexico.
“We’re going to target markets where we have heaviest footprint,” said Ted Middleton, senior VP of development-Latin America for Hilton. “Mexico will be the most important market for Homewood’s expansion.”
Middleton also said the brand plans to have good traction in Columbia, Chile, Peru and Argentina—countries in which the Hilton full-service brand has a strong presence. The Hilton brand has 69 hotels open and 33 under construction in Latin America, Middleton said. The entire Hilton Worldwide portfolio has 62 hotels (8,953 rooms) in the pipeline for the Caribbean, Mexico, Central America and South America.
“With Homewood Suites we’re leveraging off that,” Middleton said. “The typical progression is to put a Hilton (full-service hotel) in a gateway city and expand from there.”
Duncan said the presence of sister brands Hampton by Hilton and Hilton Garden Inn will help smooth Homewood’s expansion runway.
“It was important to get Hampton and Hilton Garden Inn built and going in Latin America because we see Homewood being a complement to these two brands,” Duncan said. “There’s this compatibility we wanted to take advantage of.”
That is also true in the Caribbean region, where there are plans for the Homewood Suites brand to eventually include up to 30 hotels, executives said. Last month Homewood announced its entry into the region as Inversiones Robledo SAS plans to open a 120-room Homewood Suites property in Santo Domingo, Dominican Republic, in 2017.
Inversiones Robledo’s project, as well as all future Homewood properties in the Caribbean and Latin America, will use a new prototype specifically designed for the region.
“As you go farther south, it will resemble space you would find in European markets,” Duncan said.
Going vertical
Homewood’s prototype to fit the Latin American market has a more vertical elevation than what it has in the U.S. The brand used a Homewood Suites it opened on Eighth Avenue in New York as a model for its urban product in Latin America, Duncan said.
The prototype is needed because the expectation is that the vast majority of Homewood’s expansion will come through new-construction projects, according to the executives.
“There’s not a lot of conversion opportunities in Latin America,” Middleton said. “Life/safety issues seem to crop up all the time.”
Middleton said the need to go up with the prototype stems from incredibly high land prices throughout Latin America.
“Where the economic activity is happening, the land prices are astonishingly high,” he said.
The prototype contains 121 rooms, Duncan said. A shotgun studio will measure 31 square meters (330 square feet).
“Based on the site and what they feel the market would bear, it can flex in terms of the number of rooms,” Duncan said. “That also means we could flex the lobby and seating area so it’s not overbuilt.”
The seating area of the hotel is typically built to handle 50% to 60% of the number of rooms in the hotel, Duncan said.
“What we have seen in the U.S. is you don’t want to go under the 90-suite range because it can compromise part of your performance story,” Duncan said.
A signature element for the Latin American prototype is the urban studio kitchen that is slightly smaller than the typical Homewood kitchen but still includes a full-sized refrigerator, a dishwasher, a countertop stove and sink.
“Once we saw the success of that and the international traveler embraced it (in the New York property), we knew it was going to be the baseline of how we would develop the Latin American prototype,” Duncan said.
Latin American Homewood Suites properties will have a small bar-and-restaurant component—another diversion from the typical Homewood property based on cultural needs in the region, Duncan said.
A typical Homewood Suites property requires 30 to 40 full-time employees, although that number is expected to be slightly higher in Latin America because of the enhanced food-and-beverage component, Duncan said.
Extended-stay education
The biggest challenge is educating the developers that extended-stay business exists, Middleton said.
“We have to execute and prove the demand is there,” Middleton said.
“There’s a significant process of teaching what extended stay is and why you want to get in it,” Duncan added, pointing to more profitability and streamlined performance as key attractions to developers.
The education process shouldn’t be difficult because so many Latin American real estate owners and developers are interested in expanding into the hotel sector, the executives said.
“It’s a good time for overall development in Latin America,” Middleton said. “There are some economies that aren’t doing well, but in general the ones that are performing well have had really strong (gross-domestic-product) growth.”
Middleton said a growing middle class will spur extended-stay hotel growth in the region.