Hilton casts wide net for growth in Latin America
 
Hilton casts wide net for growth in Latin America
07 OCTOBER 2016 7:25 AM

With a record year for openings so far in Latin America, Hilton Worldwide Holdings is bringing new brands and markets into its portfolio through strategic growth. 

GUAYAQUIL, Ecuador—Latin America is a strategic growth area for Hilton Worldwide Holdings, and several members of the company’s leadership team in the region shared more details about the brands and specific cities the company is targeting, as well as the operational and investment challenges the region poses.

Speaking with Hotel News Now at the South American Hotel Investment Conference, four executives from Hilton’s Latin American regional leadership team said the entire region has many opportunities, particularly for select-service hotels. However, it’s still a challenge to navigate the varying political and investment climates present in the region, though strong partnerships and education do pay off.

“Hilton has 13 hotel brands, and 10 are represented in Latin America,” said Ted Middleton, SVP of development in Latin America for Hilton.

The company has more than 90 hotels open in the region, with a pipeline of more than 50 deals. This week, the company signed a management agreement to operate a new-build 401-room Hilton hotel in Santiago, Chile, the first of the flagship brand in that country.

The deal supports what Middleton identified as the company focusing on its main brands in the region—Hilton Hotels & Resorts, DoubleTree by Hilton, Hilton Garden Inn, Hampton by Hilton, Homewood Suites and Embassy Suites by Hilton.

Hilton officials believe other brands can succeed in the region, but Middleton said brands on that list appeal to Latin America’s wide range of people traveling for leisure and business.

“There’s everything here, from conventions to commercial travel to tourism, and we try to have a product for each,” Middleton said.

Appealing to customers
A growing middle class of travelers around the region makes brands a good option, said Tom Potter, Hilton’s SVP of operations for Latin America and the Caribbean.

“The growth of air transport around the region has been fundamental, and those are the travelers we’re addressing,” he said.

There are opportunities to grow the company in secondary and tertiary markets, and loyalty plays into expansion decisions, as well, said Juan Corvinos, managing director of development in Mexico, Central America and the Hispanic Caribbean for Hilton.

“We’re developing in secondary cities around South America to grow our base,” he said. “Latin America is growing as our footprint here grows. We’re trying to fill in that base so that as people start to travel, they’ll aspire to our brands.”

Enrolling local travelers in Hilton’s rewards program keeps that demand going, he said.

However, brand awareness can be challenging, particularly for customers in gateway cities who may be familiar with the Hilton name but not Hampton, for instance.

“Of course Hilton Garden Inn is a recognizable brand because of the ‘Hilton’ name,” said Eduardo Rodriguez Suarez, managing director of development in Brazil and the Southern Cone for Hilton. “But for Hampton, for example, we play up the ‘by Hilton’ for brand awareness, because you get nice price premiums because the brand is powerful.”

Appealing to owners
Each of the executives said education and partnerships are the key to developing a strong cohort of owners and investors in Latin America.

“Hotel owners and developers have been in a market with very low brand penetration,” Potter said. “They’re beginning to see the value of these brands. Part of that is understanding what they stand for, how they help them grow their business. Existing owners see there are opportunities to grow.”

Hilton manages about 45% of its guestrooms in the region, largely through its full-service large hotels in gateway and convention markets. Most of the smaller properties, like Hilton Garden Inns and Hamptons, are franchised.

“Our strategy is always to lead in country with a Hilton, then move in with the rest of the brands,” Corvinos said.

Earlier this year, the company signed an exclusive management license agreement for Brazil-based Atlantica Hotels to develop and manage Hilton Garden Inn hotels in Brazil. The first property under the deal opened in March in Belo Horizonte, Brazil.

“It took us and Atlantica no more than two months to get a 20% increase in revenue per available room, and this is in one of the Brazilian markets that has most suffered decreasing RevPAR in Brazil,” Rodriguez Suarez said. “That’s why these partnerships are very important.”

Corvinos and Rodriguez Suarez also pointed out that soft brands—like the company’s Curio collection—appeal to certain owners that might be brand-wary. Curio debuted in Latin America with the Anselmo Buenos Aires in Argentina.

“Curio is good because yes it’s a brand, but it’s a vehicle that helps the owner have a better business without losing the hotel, its soul or vision,” Rodriguez Suarez said. “It’s a good example of how we can grow organically and with good hotels and partners.”

Regional challenges
While opportunities are great, the executives recognized the challenges the region presents as well.

“What’s critical to us is market knowledge,” Potter said. “We need to be able to anticipate and adjust pricing. Adjust market segmentation. Make sure we’re relevant to our guests and the traveler every single day.”

Middleton pointed out some of the economic headwinds that are affecting various Latin American countries.

“The biggest ones I see are downturns in commodity prices in some places like Brazil, where you have political turmoil,” he said. “You have currency fluctuations, and for some of our developers, some materials have to be bought from the U.S. and (currencies weaken). In some markets, there are overbuilding issues, like in Colombia, with projects that were driven by tax incentives. Financing a project is always an issue here.”

However, Middleton emphasized that despite the challenges, the opportunities are vast.

“We’re having the best year in our history in Latin America because the opportunities are just incredible,” he said. “Inevitably, commodity prices will go back up and political issues will change. When everything’s firing on all cylinders, it’s going to be incredible.”

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