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Hilton aims at Millennial travellers

15 October 2014
15 Oct 2014 -
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After a false start that set back its plans at least two years, Hilton Worldwide Holdings Inc. is launching a boutique, or “lifestyle,” hotel chain that aims for a wider audience and lower room rates than some direct competitors.

Canopy by Hilton will feature nascent technologies like the ability to use a mobile phone for check-in and as a room key. The hotels will emphasize neighborhood products and personalities, from locally crafted beers at the restaurant to paintings made by area artists hanging in the lobby.

Hilton is focusing on both major metropolitan areas and medium-size cities. It says it has commitments from hotel owners or developers in 11 locations including Miami, London, Oklahoma City and Nashville. Hilton’s goal is to have 100 hotels open or in the pipeline in five years.

The lodging company plans to announce Canopy at a meeting with 1,900 hotel owners on Wednesday in Orlando, Fla. The announcement comes a week after Hilton made global headlines by agreeing to sell the Waldorf Astoria in Manhattan for $1.95 billion to a Chinese insurer.

Hilton is introducing Canopy at a time when competition is heating up among so-called lifestyle brands, which tend to focus on design to attract a younger, more-fashionable crowd. While the major hospitality companies offer variations on this concept—from quirky and budget-oriented to highly stylized luxury properties—most view lifestyle or boutique brands as crucial to winning over the much-coveted millennial traveler who has been less taken with the traditional boxy-hotel model.

At the high end of the market, Marriott International Inc. is teaming with hotelier Ian Schrager on a brand known as Edition, and Hyatt Hotels Corp. created the Andaz brand.

Loews HotelsInc., meanwhile, says it is putting the final touches on the OE Collection, for Original Experiences, which it expects to launch in January. Paul Whetsell, chief executive of Loews, says OE will be a management agreement with existing or newly built luxury-oriented independent hotels, and will be in the luxury lifestyle category.

Best Western International Inc. this month introduced plans for Vib—pronounced as vibe—a midscale boutique chain. CEO David Kong says he borrowed elements from low-cost operators such as Citizen M, the trendy, boutique brand from the Netherlands that recently opened a hotel in Manhattan.

While Canopy will be a small part of the Hilton empire, which boasts nearly 700,000 rooms world-wide, Hilton wants to get it right after an early stumble.

Hilton’s new lifestyle brand was put on hold after a legal settlement in 2010 with rival Starwood Hotels & Resorts Worldwide Inc., which alleged that Hilton stole documents related to developing a lifestyle brand. Hilton agreed to a cash payment to Starwood, which has the popular W Hotels brand, and to a prohibition from entering the lifestyle segment for two years. It didn’t admit wrongdoing.

Hilton says that from the beginning, it wanted to distinguish itself from the higher-end brands. “We decided to have cool design and be in interesting neighborhoods, but at a lower price point to make it more accessible to our customers and to more owners,” said Jim Holthouser, Hilton’s executive vice president of global brands.

Hilton then honed its concept by polling 9,000 consumers in the U.S., U.K. and China of lifestyle brands.

The major chains are competing with midsize companies like Kimpton Hotels and Commune Hotels & Resorts that have been offering boutique hotels for years. Some executives say they are skeptical the giants can mass-produce a superior product.

“I’m always suspect about the ethos of boutique properties operated by a massive hotel company,” says John Pritzker, a private-equity investor and a founder of Commune. “It’s hard to be all things to all people when you’re that massive.”

Hilton began developing a lifestyle brand more than five years ago, but concluded that customer tastes for this product had changed since then, says CEO Christopher Nassetta.

He found, for example, that many people wanted more natural light and less of a hip bar scene.

“We think this opens it up to a broader range of ages and types of travelers,” Mr. Nasetta says. “This is especially true for females. Our research suggests a lifestyle hotel with a dark and brooding bar scene hasn’t appealed to them.”

By aiming for a wider audience, Mr. Nassetta thinks Canopy can reach scale at a faster rate than competitors, where even the most popular lifestyle brands have 50 or so properties.

Hilton plans to franchise Canopy, its 12th brand, and manage about half the properties. Like several rival lifestyle brands, rooms will be smaller than the standard 350 square feet in full-service hotels.

The new hotels will provide guests with a gift bag that could include items like chocolate and popcorn. Canopy will feature evening tastings of locally produced wines, spirits or beers.

“Anything that celebrates the local neighborhood,” says Mr. Holthouser. “That’s what customers are looking for.”

Read more: MARRIOTT DEBUTS MOXY HOTELS IN MILAN, ITALY

MARRIOTT KEEPS EYES ON MILLENNIALS

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