Nassetta: ‘Extensive opportunities’ for Curio
02 JUNE 2014 7:35 AM
The launch of Curio—A Collection by Hilton allows Hilton Worldwide to fill the soft-brand niche in the hotel industry.
McLEAN, Virginia and NEW YORK—Although it is not internally calling it a soft brand, Hilton Worldwide Holdings is joining the hotel branding sector’s courting of independent hotels with the launch of Curio—A Collection by Hilton. Curio is the 11th brand in the company’s portfolio.
The Curio brand debuts with letters of intent signed for five hotels: SLS Las Vegas Hotel & Casino; The Sam Houston Hotel in Houston; Hotel Alex Johnson in Rapid City, South Dakota; The Franklin Hotel in Chapel Hill, North Carolina; and a yet-to-be-named hotel development in Portland, Oregon.
“We have very close ties with our owners, and we listen carefully to what they and our guests want. It’s one very important reason for our success. In fact, about 75% of our pipeline represents current Hilton Worldwide owners. Many of them achieve great results with one of our brands and then move on to add another to their portfolio,” said Christopher J. Nassetta, president and CEO of Hilton, in an email.
“With over 31% of the hotel market in the U.S. being independent hotels, and even higher percentages within the (European Union) and Asia/Pacific, our research has shown extensive opportunities for Curio. Our owners have told us that flexibility is key to a brand like this. They want to retain the character of their ‘gems’—those well-known, unique hotels or brands that are woven into their destinations—but they also recognize what having the power of Hilton HHonors and the Hilton name behind them can do,” he said.
“It started with the Hilton (Hotels & Resorts) brand team; now it’s a standalone team,” said Rob Palleschi, global head of the Hilton brand, during an interview Monday held in conjunction with the 36th annual New York University International Hospitality Industry Investment Conference. “We leveraged the Hilton brand team, the owner advisory team, as well as all of the resources globally.”
Other large branding companies—including Marriott International (Autograph Collection), Starwood Hotels & Resorts Worldwide (Luxury Collection) and Choice Hotels International (Ascend Collection)—have participated in the soft-brand arena for several years. Hilton has dabbled in the concept to help grow its DoubleTree by Hilton brand, but the introduction of Curio is a full-time commitment.
“We’re calling this a brand, not a soft brand,” Palleschi said. “This is a proper brand supported by a brand team and resources. … We’re telling owners: your vision, our engines.”
Soft brands provide the benefits of large distribution systems and access to millions of loyalty club members without encumbering hotels with the rigid guidelines that accompany a full licensing or franchising arrangement. Soft brands tend to allow hotels to keep their name and use the brand as a secondary name, which is something Curio will promote.
“It’s something we’ve been doing for many years as we took iconic, independent assets and pushed them into some of our other brands, such as DoubleTree, Hilton and Waldorf Astoria,” Palleschi said. “We’ve had success with it; however, with as much activity as there is now in the development community, owners are pushing it more and more. They want this from Hilton, and some owners are even demanding us to get this out. The timing is right because of the fever pitch with development.”
Palleschi said the Curio agreement is a bundled deal with which owners get access to all of Hilton’s resources.
“It’s not à la carte,” he said, adding that owners aligning with Curio will pay a fee of 4% of gross rooms revenue—the same fee in place for the company’s management and franchising agreements.
The appeal to consumers and owners drove Hilton’s desire to enter the segment.
Nassetta explained the concept for Curio during Hilton’s first-quarter earnings call: “I’d describe (it) as a brand that will be a 4-plus-star brand that will aggregate iconic urban and resort hotels that don't really fit in the box of the specified standards of any of our other brands.
“What we find is increasingly, some of our existing customers, as well as other customers that we want to attain, are interested in those types of locations and staying in these kind of unique iconic hotels, and we think we can better serve our customers by offering that type of product. It often offers us a great way to serve them better but also grow the company at a faster pace because not only will it not require (capital expenditures), but it is very conversion-friendly as a brand.”
Palleschi said there is no set date for the Curio reservations platform to go live. Properties across Hilton’s platform generally begin offering reservations about 90 days prior to opening, and that will be the case with Curio.
The properties will join the system progressively throughout the year with the 1,620-room SLS Las Vegas expected to be the first one on board by 1 September. It is owned and operated by SBE and occupies the site of the former Sahara Hotel & Resort. Owner Sam Nazarian said in a news release that aligning with the Curio brand is an advantage for the hotel.
“Partnering with Hilton and Curio allows us to maintain the SLS brand identity while offering the benefits of Hilton Worldwide’s commercial engines and the strength of the Hilton HHonors loyalty program,” he said.
The HHonors program has more than 40 million members, according to Hilton.
Palleschi said Curio will be 4- and 5-star hotels that provide travelers with indigenous and authentic experiences. Allowing hotels to maintain their unique identity is a cornerstone of the soft-brand philosophy—something Hilton is eager to expand upon in its portfolio.
The goal is to grow the brand to 250 properties within five years. “We need to be able to get there,” Palleschi said. “There are 1,500 independent hotels that are 4- to 5-star hotels worldwide, and we just want more than our fair share of that.”
Curio joins Hilton’s 10 other brands: Hilton Hotels & Resorts, Waldorf Astoria Hotels & Resorts, Conrad Hotels & Resorts, DoubleTree by Hilton, Embassy Suites Hotels, Hilton Garden Inn, Hampton Hotels, Homewood Suites by Hilton, Home2 Suites by Hilton and Hilton Grand Vacations. The company has more than 4,100 managed, franchised, owned and leased hotels and timeshare properties comprising more than 685,000 rooms in 92 countries and territories.
Lifestyle brand on tap for later this year
As Nassetta alluded to in the news release, Hilton is expected to introduce another brand this year. Most industry observers expect the brand to be a lifestyle brand to fill the void created by the foiled Denizen brand.
“(Curio and the lifestyle brand) don’t tie together, but they will complement each other,” Palleschi said. “(Lifestyle) is one more category that we need in our stable of brands.”
During the first-quarter earnings call, Nassetta said the lifestyle brand will appeal to a consumer base looking for more affordable value in the segment. The launch most likely will come this fall.
“Most of the competition has sort of accessed lifestyle at a luxury price point. We believe that there's a much broader base of demand at the upper end of upper upscale,” he said. “And so we sort of are coining the phrase, ‘accessible lifestyle’ from a price point of view. And we think that being at that price point and a product and service delivery that matches with that is going to allow us to serve more customers better and build a brand that is much bigger than what we've seen others be able to do. It also, by the nature of what it is, will incorporate new builds, none of ours, on our balance sheet, but will be very conversion-friendly.”
Nassetta said during the call that the company has high expectations for the two new brands.
“These are going to be able to incrementally add significantly to the growth of the company long term as well as short term,” he said. “Neither will have a particularly meaningful impact on this year's net unit growth, just given the sequence of when they're being launched, might have a little bit of impact, but not significant impact. But we'll start to have some good impacts starting next year.”
Patrick Mayock contributed to this report.