Hilton weaves organic growth with launch of Tapestry
 
Hilton weaves organic growth with launch of Tapestry
23 JANUARY 2017 6:00 AM

The newest offering from Hilton is a soft brand targeted at upscale independent hotels. The first property in the Tapestry Collection is expected to open in the third quarter of 2017.

MCLEAN, Virginia—During an era dominated by the consolidation of hotel brands and parent companies alike, Hilton Worldwide Holdings is continuing its quest for growth through organic means.

The latest expansion vehicle for the company is its Tapestry Collection brand, which is being unveiled today during the Americas Lodging Investment Summit.

Owners of seven hotels in six cities have signed letters of intent with Tapestry: Syracuse, New York; Chicago; Nashville, Tennessee; Warren, New Jersey; Hampton, Virginia; and two in Indianapolis, Indiana. The collection has an additional 35 deals in process, with the first property expected to convert to the brand by Q3 2017, according to the news release announcing the brand’s launch.

Hilton has added the last six of its 14 brands organically. Not since its 1999 purchase of Promus Hotel Corporation—which included the DoubleTree, Embassy Suites, Hampton Inn and Homewood Suites brands—has it gone the acquisition route to grow its brand portfolio.

This organic growth method allows Hilton—the world’s second largest hotel company with more than 790,000 guestrooms in its portfolio at the end of 2016, according to HNN’s parent company STR—to develop a product that’s a “bullseye to what the customer wants,” according to President & CEO Chris Nassetta.

“We look at everything; it’s not like we don’t know how deals are done,” Nassetta said during a telephone interview with Hotel News Now. “We have chosen not to do it. … When we look at our growth, deploying those brands … and adapting those existing brands to make sure they remain relevant ... doing it organically using third-party capital is a better way to deliver returns for our developers and experiences for our guests.”

“We’ve purposely grown organically,” Mark Nogal, global head for the newest addition to the Hilton brand stable, said during a separate phone interview from Paris. “Chris Nassetta has been very much the driving force behind that.”

Nassetta said the company will continue to look at possible deals, but with Tapestry and other undisclosed projects in the ideation stage, Hilton is comfortable being an organic-growth-driven entity.

“I would never say never. … We’ll keep looking,” Nassetta said. “It would be a silly thing for any CEO to say we’d never buy anything. We’re not out doing any bounty hunting.”

Benefits of soft brand
The Tapestry Collection is a soft brand, which is a growing phenomenon in the hotel industry that allows hotels to maintain their independent names as the prominent identity with the brand name secondary. The new brand’s growth strategy targets the world’s 15,000 upscale independent hotels, according to Nogal.

“When you look at that category, there really is no (soft) brand established in the upscale category,” he said. “We’re defining the category.”

Nassetta said soft brands are about one thing: Customer centricity. Customers are looking for offerings such as the Tapestry Collection, he said, that will provide consistent quality in a unique setting.

“Maybe not every time they travel, but sometimes when they travel, they want this kind of product,” Nassetta said, adding that the levels of standards without being a defined product is appealing to most travelers.

Tapestry is a natural complement to Hilton’s Curio Collection, an upper upscale soft brand launched in 2014, said Nogal, who also serves as the global head of Curio.

“Owners brought hotels to us that didn’t fit in the upper upscale segment, that four- to five-star category we were looking for,” he said.

Independent experience
Nogal said Tapestry’s primary growth strategy will focus on conversions.

“The properties will be scattered—urban, suburban, tertiary (and) destination markets,” he said.

That diversity of locations means the properties will have varying types of onsite food offerings, Nogal said. For example, properties in urban locations that have many nearby restaurant choices could have a limited food-and-beverage operation, while suburban and tertiary locations will likely have onsite three-meal restaurants.

“The customer is looking for a true independent experience, one that is vibrant, uncommon and reliable,” Nogal said. “Business travelers … they want to do something outside their normal work hours to learn more about their destination.”

The brand leader said owners of independent properties, who are seeking brand affiliation that will allow them to maintain their unique identity, turn to Hilton because of its track record and reputation among consumers.

“It’s a simple thing: deliver the best brands and the best experiences for customers and the best returns for our developers,” he added. “We will drive greater systemwide market share because of the product types we offer.”

“(Owners) know the power of our engine,” Nogal said. “It’s about coming in and being able to provide the confidence to the traveler to book these independent hotels and continue their journey of the exploration of a new neighborhood.”

‘Keeping it close’
Tapestry’s path will begin with a footprint in the Americas.

“We want to try to keep it close so we can monitor it,” Nogal said, adding that executives know there are changes in the early days of any brand’s life. “This enables us to refine that before taking on a global basis.”

While Nogal is eager to build a large portfolio with the large playing field, it will be measured growth that prevails, the executives said.

“We would love to be in a situation where we curate 55 or so properties by 2020,” Nogal said.

“The opportunity over time for us is very, very large,” Nassetta said. “We definitely will take this show on the road.”

Nassetta said the size of individual brands out of the gate isn’t as important as the overall size of the company.

“The fact is that we’re at scale—we’re a huge-scale operation,” Nassetta said.

Nogal declined to name a target average daily rate for the brand.

“The price is market-driven,” he said. “Owners will set the prices.”

About the name
Hilton explored more than 500 names before deciding on “Tapestry” because its definition as a one-of-a-kind woven piece of art represents the unique style of the properties it is targeting, Nogal said.

Hilton’s full brand lineup includes: Hilton Hotels & Resorts, Waldorf Astoria Hotels & Resorts, Conrad Hotels & Resorts, Canopy by Hilton, Curio - A Collection by Hilton, DoubleTree by Hilton, Tapestry Collection by Hilton, Embassy Suites by Hilton, Hilton Garden Inn, Hampton by Hilton, Tru by Hilton, Homewood Suites by Hilton, Home2 Suites by Hilton and Hilton Grand Vacations.

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