The Americas Lodging Investment Summit, better known as ALIS, in January, is the first hospitality conference of the new year. It’s also typically a time when lodging companies reveal big announcements, like a new brand. It turns out, Hilton couldn’t wait that long.
The McLean, Va.-based hotel company today announced an addition to its brand quiver in Spark by Hilton, a premium economy, conversion-only offering that Hilton says already has 100 deals in various stages of development.
Hilton, unlike many other brand companies, has grown its brands organically rather than through mergers and acquisitions, something CEO Chris Nassetta has long championed.
What, then, was the spark that ignited Hilton’s entrance into the hyper-competitive economy space, where the likes of Hilton, Marriott and Hyatt have long avoided?
“In looking at the economy category, we saw a segment that has grown dramatically but lacks consistency, providing us an opportunity to deliver on the needs of this underserved segment of travelers,” said Matt Schuyler, chief brand officer for Hilton. “This breakthrough premium-economy brand will deliver the essentials done exceptionally well for every guest, every time along with friendly service – ensuring all travelers can enjoy a great hotel experience where they feel truly cared for.”
Schuyler also told The Points Guy that “the impetus was the notion that the consumer is evolving post-pandemic. People are looking for bargains.”
As is typical with most economy brands, which lean spartan, Hilton states that Spark by Hilton will “meet the needs of guests seeking value, quality and consistency.”
For Hilton’s other important cohorts, owners and developers, Spark by Hilton “leverages an innovative conversion model to offer a compelling investment option for owners,” which portends a model that could potentially entice other economy brand owners into the Hilton system.
In its press release, Hilton said that it is “creating greater value for owners and operators”… through a “cost-effective conversion brand [that] provides a unique opportunity for existing properties by reimagining the economy segment and focusing on areas that drive the guest experience while also providing a consistent look and feel across each hotel.”
Hilton told HOTELS that it is in the process of finalizing costs, but estimates that construction costs top convert, minus land, will be in the low $20,000 per key, including both exterior and interior.
There is reason why both brands and owners—even institutional—are leaning into the economy hotel space: profitability. According to HotStats, economy hotels in the U.S. operate 40% GOP margins, which is up to 15 percentage points higher than those with more complex operations, said HotStats’ COO Michael Grove.
“Economy hotels continue to grow in popularity, due to the efficiency of the operating model and cost of build / conversion,” he said. “While economy hotels have less operational levers to pull when demand is low and less ability to drive additional spend per guest, owners and investors often feel more comfort in operations with lower exposure to operational headwinds that full-service hotels may be open to.”
Beyond becoming Hilton’s 19th brand, it puts lodging companies with legacy economy brands, from Wyndham to Red Roof and Motel 6, on notice that Hilton is coming for market share and bringing with it a vast loyalty program.
Expect rates to run sub $100, but, like everything, it will depend on the market. The expectation is that these hotels will not be in downtown, urban markets, but secondary and tertiary markets (think driving down an interstate and seeing Spark by Hilton on a signpost shared by the likes of Days Inn, Microtel, Super 8, Econo Lodge and Cracker Barrel).
Hilton also said there were expectations to develop Spark by Hilton properties in beach communities.
Hilton’s latest brand additions have been down segment, with the likes of Motto, a micro-brand for urban locations, and Tru by Hilton, a midscale offering that plays below its category-killer Hampton brand.
Here is some further color on Spark by Hilton, as explained by Hilton:
“Spark by Hilton will offer simple, inspired design with splashes of color and cheer that bring the outdoors in. The public space will feature multi-functional seating from communal tables to rocking chairs, offering plenty of options for guests to enjoy breakfast, socialize or work throughout the day.
“Guest rooms will be comfortable and relaxing so travelers can unwind and recharge for whatever comes next. Focusing on practical amenities, the simple, streamlined furniture will include an open closet, in-room refrigerator, multi-purpose work surface and bright bathroom”
The brand will also offer a simple and free breakfast, featuring a “signature bagel bar with spreads.”
“Spark by Hilton was developed in close collaboration with our developer community, and we are thrilled by the positive feedback and excitement we have received to date,” said Alissa Klees, brand leader for Spark by Hilton.
Hilton said the first properties are anticipated to open this year.