REPORT FROM THE U.S.—Hilton Worldwide Holdings’ executives believe Homewood Suites and Home2 Suites can grow into the preeminent extended stay brands, and development in Latin America could be the key to making that happen.
Adrian Kurre, global head for the Homewood and Home2 brands, said the growth of those two brands could greatly benefit Hilton as a whole because extended stay typically sees stronger revenue per available room increases during the weaker portions of the cycle than other hotels.
“They do well when in the cycle of more advantageous periods,” Kurre said. “They really excel in softer sides.”
Expanding to Latin America
Kurre said Hilton aims to be one of the first companies to push the extended stay model into Latin America in a big way. He said the company has put a dedicated team in the region in part because there aren’t many owners and developers who understand the economics of extended stay.
The plan is to move Homewood Suites into Latin America and educate hotel owners on the “incredible” return on investment opportunities, Kurre said. Following that, Hilton will evaluate where it moves with Home2 Suites and the other markets to explore.
Hilton plans to build 30 to 40 extended-stay properties in the Caribbean, Central America and South America in the next few years, Kurre said, with Colombia, Mexico, Brazil, Chile and Argentina as potential markets. The company has some contracts in place already, including properties in Cabo San Lucas, Mexico; Santo Domingo, Dominican Republic; and Silao, Mexico. There are several new builds that should start opening later this year and in 2017.
“We’re looking to find some good partners interested in what I believe are the best economics in the hotel industry today for return on investment in managing hotels as extended-stay hotels, not just transient hotels with kitchens in them,” Kurre said.
It takes a little more time to sell this concept than it does a transient hotel, Kurre said. The owners and developers want to know how they can lower their rate for extended-stay business and still drive margins.
“Right now, we need to get a few of these open, showing the economic value of them,” he said.
The team is explaining to developers and owners in the region that GMs and directors of sales are key positions to focus on to drive that side of the business. The extended-stay model also offers an arguably easier business, he said, as there are fewer check-ins and check-outs and housekeeping and laundry services are more efficient.
“It’s all so much easier when you get into the extended-stay side of the business,” Kurre said. “It’s so much easier to help that money fall down to the bottom line.”
To lead the pack
Hilton’s main competitor, Marriott International, has 700-plus extended-stay properties in North America, Kurre said, and Hilton has 385 Homewood Suites open with more than 128 in the pipeline. He said Hilton has the opportunity to drive extended-stay business in urban and suburban markets.
“We’re working hard to try to get Homewood as the default brand for extended-stay hotels in North America,” he said.
There are 73 Home2 Suites open in the region, he said, with another 300 or so in the pipeline across the continent, which gives the company “wonderful opportunity” to crush the midscale extended-stay side.
To help increase development of extended-stay properties, Hilton has looked at the cost to build Homewood Suites to improve the return on investment, Kurre said. The new prototype has 85% of rooms as studio suites instead of one-bedroom suites, shrinking the overall footprint. That move hasn’t been a negative for consumers, he said.
“We used to be adamant about the one-bedroom suites, but they’re much more expensive to build,” he said. “With studio suites, we’re on line with the development costs for owners.”
A taste of home
While touring Homewood and Home2 properties in Salt Lake City, and the San Francisco Bay area, Kurre asked GMs whether guests actually use the kitchens in the guestrooms.
“The answer from them was, ‘Absolutely, they get used all the time,’” he said, adding it’s the same with the outdoor barbecue areas.
Because guests use the kitchen amenities so frequently, he said, the brands have arranged a service to deliver uncooked meals that guests can prepare for themselves in their rooms that take about 10 minutes or more to prepare.* The new service has launched in a few test hotels to see how guests respond to it.
In those test properties, guests can preorder from a selection of four dishes, with more options being added in the future.* The guests receive all of the ingredients they need to cook the meals, which are designed to be cooked by cooktops, induction burners and microwaves.
“The folks doing that extended-stay trip, they really like that,” he said. “They get tired of going out for dinner.”
Clarification, 6 April 2016: An earlier version of the story reported only the minimum number of prepared meals available for guests and only the minimum preparation time for those meals.